THE WATCHES OF SWITZERLAND GROUP A BUSINESS BUILT ON DELIVERING EXCELLENCE ANNUAL REPORT AND ACCOUNTS 2026 ![img-0.jpeg](img-0.jpeg) --- ## ABOUT US The Watches of Switzerland Group is an international retailer of world leading luxury watch brands, complemented by a strong luxury jewellery offering. The Watches of Switzerland Group provides clients with the finest selection of luxury timepieces from all the major groups and independent brands together with an impressive presentation of smaller independent brands. Our showrooms are in prominent, high-profile shopping areas within the US and UK. ## OUR PURPOSE Our Purpose is to WOW our clients while caring for our colleagues, our communities and our planet. Our Purpose is an inextricable part of how we do business. Our sustainability pillars of People, Planet and Product are considered in our decision-making processes, at every level of our business. ## OUR VALUES Our Values shape our culture and behaviour, driving performance and purposeful action. They are the cornerstone of our Code of Ethics and truly represent who we are. WE EARN TRUST & CONFIDENCE WE TREAT EVERYONE WITH RESPECT WE DO THE RIGHT THING, ALWAYS WE CARE FOR OUR COMMUNITIES WE PROTECT OUR PLANET WE ADVOCATE FOR OUR INDUSTRY Read more page 84 OUR WATCH BRAND PARTNERSHIPS ROLEX PATEK PHILIPPE GENEVE AUDEMARS PIGUET Le Brouin OMEGA Cartier TAGHeuer BREITLING 1884 TUDOR IWC SCHAFFHAUSEN Grand Seiko TISSOT SWISS WATCHES SINCE 1853 LONGINES THEWOSGROUPPLC.COM ![img-1.jpeg](img-1.jpeg) --- ![img-2.jpeg](img-2.jpeg) # STRATEGIC REPORT 02 At a Glance 03 Financial Highlights 04 Chair's Statement 06 Chief Executive Officer's Review 10 Market Review 24 Our Business Model 27 Our Brand Partnerships 34 Our Strategy 58 Strategy in Action 64 Key Performance Indicators 69 Financial Review 75 Non-Financial and Sustainability Information Statement 76 Section 172(1) Statement 80 Environmental, Social and Governance 138 Risk Management 142 Principal Risks and Uncertainties 148 Going Concern and Viability Statement # CORPORATE GOVERNANCE REPORT 152 Corporate Governance at a Glance 154 Chair's Introduction 156 Board of Directors 159 Corporate Governance Statement 171 Board Performance Review 172 Nomination Committee Report 175 Audit & Risk Committee Report 181 ESG Committee Report 184 Remuneration Committee Report 189 Directors' Remuneration Report 198 Directors' Report # FINANCIAL STATEMENTS 204 Independent Auditor's Report 210 Consolidated Income Statement 211 Consolidated Statement of Comprehensive Income 212 Consolidated Balance Sheet 213 Consolidated Statement of Changes in Equity 214 Consolidated Statement of Cash Flows 215 Notes to the Consolidated Financial Statements 255 Company Balance Sheet 256 Company Statement of Changes in Equity 257 Notes to the Company Financial Statements 261 Glossary 266 Shareholder Information 1 --- AT A GLANCE ![img-3.jpeg](img-3.jpeg) WATCHES & SWITZERLAND ![img-4.jpeg](img-4.jpeg) Mappin & Webb ![img-5.jpeg](img-5.jpeg) GOLDSMITHS ![img-6.jpeg](img-6.jpeg) MAYORS ![img-7.jpeg](img-7.jpeg) Deutsch & Deutsch **DI** ![img-8.jpeg](img-8.jpeg) BETTERIDGE ![img-9.jpeg](img-9.jpeg) MONO-BRAND BOUTIQUES ![img-10.jpeg](img-10.jpeg) HODINKEE ![img-11.jpeg](img-11.jpeg) ROBERTO COIN ![img-12.jpeg](img-12.jpeg) Analog:Shift ![img-13.jpeg](img-13.jpeg) ONLINE ![img-14.jpeg](img-14.jpeg) TRAVEL RETAIL WELL-INVESTED SHOWROOM NETWORK 126 UK SHOWROOMS AT 3 MAY 2026 65 US SHOWROOMS AT 3 MAY 2026 191 TOTAL SHOWROOMS AT 3 MAY 2026 2,942 NUMBER OF COLLEAGUES AT 3 MAY 2026 2 THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 --- FINANCIAL HIGHLIGHTS REVENUE £1,828m CHANGE VS LY: CONSTANT CURRENCY¹: +11% +13% RETURN ON CAPITAL EMPLOYED¹ 18.0% CHANGE VS LY: -100bps ADJUSTED EBIT¹ £155m CHANGE VS LY: CONSTANT CURRENCY¹: +3% +6% PROFIT BEFORE TAX £133m CHANGE VS LY: +76% SALES BY CATEGORY (%) ![img-15.jpeg](img-15.jpeg) SALES BY REGION (%) ![img-16.jpeg](img-16.jpeg) HISTORICAL SALES PERFORMANCE ![img-17.jpeg](img-17.jpeg) PROFITABILITY ![img-18.jpeg](img-18.jpeg) 1 This is an Alternative Performance Measure. Refer to the Glossary on pages 261 to 265 for definition and reconciliation to statutory measures where relevant. 2 Please refer to the Glossary on pages 261 to 265 for a definition. 3 STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS --- CHAIR'S STATEMENT IAN CARTER CHAIR # DELIVERING PROGRESS, BUILDING FOR THE FUTURE THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 --- “ “Our FY26 performance demonstrates the strength and resilience of our business and reinforces our confidence in the future.” I am pleased to present my Chair’s Statement for FY26, a year in which the Group made further progress against its strategy and delivered a strong performance across the business and record Group revenue. The Group delivered results ahead of expectations, reflecting the underlying strength of our business, the quality of our brand relationships and our continued focus on operating the business well. Trading momentum strengthened as the year progressed, leaving the business well positioned as we look ahead to FY27. This was achieved against a challenging and, at times, volatile external backdrop. The year unfolded amid ongoing geopolitical uncertainty and persistent inflationary pressures, while in the US the introduction of higher tariffs on Swiss watch imports had a significant impact on the luxury watch market. At their peak, these tariffs led to price increases from brands and, in some cases, changes to retailer margin arrangements, which largely remained in place even as tariff levels subsequently moderated. We are cognisant of the ongoing macroeconomic uncertainty in the Middle East but feel well placed to execute what is within our control. Our US business delivered a strong performance, supported by strong organic growth, continued investment in our showroom estate and the contribution from recent acquisitions. In the UK, trading improved during the year, supported by selective investment and the strength of our portfolio of brands and disciplined management of the showroom estate. Across the Group, our focus on delivering a high-quality client experience remained a clear priority. A significant strategic milestone during the year was the acquisition of a majority stake in Deutsch & Deutsch, a family-owned luxury watch and jewellery retailer operating four showrooms in Texas. This acquisition was an excellent strategic fit for the Group, strengthening our presence in attractive US markets and further developing our long-standing partnerships with luxury watch brands. We are pleased to welcome our new colleagues and to continue working with the existing leadership team to build on the strong foundations of the business. We continued to invest in our showroom portfolio through new openings, relocations and refurbishments, ensuring our retail environments remain of the highest standard. Our pipeline of future projects remains compelling and supports our confidence in the Group’s long-term growth prospects. Our jewellery strategy continued to make good progress during the year. Wholesale trading at Roberto Coin Inc. was encouraging, and we continue to see opportunities to develop the brand further across North America. In the UK, the opening of the Mappin & Webb Luxury Jewellery boutique in Manchester marked our first dedicated jewellery-only showroom, reflecting our confidence in the long-term opportunity within this category. Pre-owned watches remained an important area of growth in FY26. The continued roll-out of the Rolex Certified Pre-Owned programme across our estate, alongside growth in our wider pre-owned offerings, supports our commercial objectives and contributes to a more circular approach within the luxury watch market. Our online and digital presence continued to develop during the year, with Hodinkee further strengthening our reach and engagement with luxury watch enthusiasts around the world. The Group has a clear and disciplined approach to capital allocation, prioritising investment for growth through showroom elevation, new projects and acquisitions, before returning any surplus capital above and beyond those requirements as appropriate. The Group’s balance sheet continues to be strong. #### SUSTAINABILITY We remain committed to operating our business responsibly with a long-term perspective. During the year, our net-zero targets to 2050 were validated by the Science Based Targets initiative and our continued efforts to embed our Purpose and future-proof our business across our sustainability pillars People, Planet and Product, were reflected in our enhanced rating agency scores, including recognition by a leading global ratings provider as a 2026 industry leader. Our colleagues remain central to the success of our Group. During the year, we have continued to invest in culture, development and wellbeing, maintaining good levels of engagement and continuing to be a great place to work. #### DIRECTOR CHANGES Robert Moorhead resigned from the Board as Non-Executive Director and Chair of the Audit & Risk Committee in November 2025. Paul Edgecliffe-Johnson was appointed as a Non-Executive Director on 19 February 2026 and Chair of the Audit & Risk Committee effective from 1 March 2026, and we are pleased to welcome him to the Board. Paul brings extensive experience in both the luxury consumer segment and the US market; his breadth and wealth of experience will be a valuable addition to the Board. Further details on Paul’s appointment can be found in the Corporate Governance Statement on page 158 and in the Nomination Committee Report on page 173 to 174. #### GOVERNANCE Strong governance, together with a continued focus on diversity and inclusion, underpins the way the Group is run. During the year, the Group remained compliant with the recommendations of the Parker Review and the FTSE Women Leaders Review. The Board remains focused on maintaining high standards of oversight and governance as the business continues to develop. #### LOOKING AHEAD We enter FY27 in a strong position. Our strategy remains clear, our balance sheet is strong, and we have a good pipeline of showroom projects and development opportunities. The strength of our brand partnerships, the underlying demand for luxury watches and jewellery and the capability of our teams give us confidence in the Group’s prospects over the long term. On behalf of the Board, I would like to thank Brian Duffy, the leadership team and all colleagues across the Group for their continued commitment and hard work. I would also like to thank my fellow Board members for their support throughout the year. Finally, I would like to thank our clients, brand partners, shareholders and other stakeholders for their continued trust and support. IAN CARTER CHAIR 13 July 2026 STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 5 --- CHIEF EXECUTIVE OFFICER'S REVIEW THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 ![img-19.jpeg](img-19.jpeg) --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS “ “I am proud of the strong performance delivered in FY26, with record Group revenue. The US business continued its momentum, supported by showroom investment and acquisitions, while trading in the UK improved over the year. Our progress reflects disciplined execution across our strategic growth pillars and the strength of our long-standing partnerships with leading luxury watch and jewellery brands.” # STRATEGIC PROGRESS AND STRONG DELIVERY FY26 was a year of strong delivery for the Group. We achieved record revenue and profit, which was ahead of our previous guidance and market expectations. This performance reflects the strength of our business model, the quality of our brand partnerships and consistent execution across our strategic growth pillars. The external operating environment remained challenging, with macroeconomic uncertainty and inflationary pressures, particularly the price of gold, persisting. In the US, the introduction of tariffs on Swiss watch imports led to price increases and changes to retailer margin structures. While tariff levels subsequently moderated, some of these changes have remained. Against this backdrop, we are very encouraged by our performance, with trading improving as the year progressed. This was supported by investment in our showroom estate, growth in pre-owned, progress in luxury jewellery and contributions from acquisitions, alongside our focus on delivering a high-quality client experience. We continue to make consistent progress across each of our strategic growth pillars: - **Showroom Investment:** Making targeted investment into our compelling pipeline of projects, ensuring we maintain best-in-class luxury retail environments, representative of the brands we partner with - **Pre-Owned:** Growing an increasingly important segment of the luxury market, underpinned by Certified Pre-Owned - **Ecommerce:** Continuing to enhance our online proposition and expanding our client reach - **Luxury Branded Jewellery:** Building increasing scale in a complementary category with significant growth potential - **Acquisitions:** Accelerating our growth through targeted acquisition of high-quality businesses in attractive markets; further scaling our US showroom network represents a key opportunity - **Client Experience:** Maintaining our focus on delivering exceptional client service and building long-term client relationships US The US delivered another standout performance in FY26 and is now our largest market by revenue and profit. This represents a significant milestone for the Group since entering the market eight years ago. Growth was broad-based, led by underlying demand, showroom investment and the contribution from recent acquisitions. We continued to make good progress in our showroom investment programme, completing a number of projects and advancing a strong pipeline. Our focus remains on developing our presence in key locations, in partnership with leading brands, and delivering the highest standards of luxury retail experience. During the year, we opened a new Watches of Switzerland multi-brand showroom in Minneapolis alongside two relocations. Acquisitions remain an important component of our growth strategy. The acquisition of a majority stake in Deutsch & Deutsch during the year was an important moment for the Group. This is a great addition to our business; its four showrooms bring a well-established presence and deep-rooted client relationships in attractive Texas markets as well as long-standing relationships with leading luxury watch and jewellery brands. The business is performing well, and integration is progressing as planned. Pre-owned watches continued to perform strongly in the US, supported by the strength of the Certified Pre-Owned programme across our estate, alongside growth in our wider pre-owned offering. In FY26, our Group pre-owned watch revenue exceeded 8% of our total luxury watch revenue, with the US continuing to lead the Group in terms of mix. This remains an important part of our strategy and broadens our offer to clients. 7 --- CHIEF EXECUTIVE OFFICER'S REVIEW CONTINUED In luxury branded jewellery, Roberto Coin delivered great progress. Sales within our Mayors showrooms increased significantly following the introduction of shop-in-shop concepts, demonstrating the brand's potential in the US – the largest global market for luxury jewellery. Building on this success, we are expanding the shop-in-shop model with a number of key brand partners and believe Roberto Coin is well positioned to capture a greater share of a market where luxury consumers are increasingly shifting spend towards branded jewellery. During the year, we also strengthened the brand's direct presence, opening three Roberto Coin mono-brand boutiques in Miami, Las Vegas and New York, with a fourth boutique scheduled to open in Tampa in FY27. Our online offering performed well during the year. Hodinkee remains an important platform for engaging with a global audience of watch enthusiasts and supporting our online offering. We launched an updated Hodinkee app towards the end of the period, enhancing client engagement and enabling clients to purchase directly online. Key projects during the year included: - New Watches of Switzerland Southdale, Minneapolis - Relocation of Mayors Lenox, Georgia - Relocation of Mayors University Town Center, Florida - New Roberto Coin boutiques in Hudson Yards, New York; Forum Shops at Caesars Palace, Las Vegas; and Miami Design District, Florida UK In the UK, trading improved over the course of the year, despite a more subdued consumer environment. This reflects the strength of our portfolio of brands, disciplined management of the showroom estate and targeted investment in key locations. Showroom investment remains central to our approach in the UK. Over the last two years, we have shifted our showroom network to focus on fewer, higher impact locations where we can deliver the strongest returns and the highest standards of client experience. A standout example is the flagship Rolex boutique on Old Bond Street. Since opening, the showroom has performed exceptionally well and is now one of the leading Rolex retail destinations globally, reflecting the strength of our partnership. Pre-owned watches also performed strongly in the UK, supported by the ongoing roll-out of the Rolex Certified Pre-Owned programme across our showroom estate and the development of our wider pre-owned offering. In luxury jewellery, we opened our first dedicated jewellery-only showroom with the Mappin & Webb boutique in Manchester. This marks an important step in the development of our jewellery strategy and reflects our confidence in the long-term opportunity in this category. In addition, we introduced a lab-grown diamond offering in the UK, which has performed well, driving incremental sales and resonating well with consumers. Key projects during the year included: - Expansion and conversion of Mappin & Webb Birmingham - Relocation of Goldsmiths Merry Hill - Expansion and conversion of Goldsmiths Oxford - Refurbishment of Northern Goldsmiths, Newcastle - Expansions and relocations of a further five UK showrooms - New Mappin & Webb Luxury Jewellery boutique, Manchester - New Audemars Piguet, AP House, Manchester operating as a joint venture "The flagship Rolex boutique on Old Bond Street is a powerful example of our showroom strategy in action. It continues to perform ahead of our expectations and demonstrates what can be achieved through close collaboration with our brand partners in the very best locations." BRIAN DUFFY CEO ENVIRONMENTAL, SOCIAL AND GOVERNANCE We have continued to progress against our strategic pillars of People, Planet and Product throughout FY26. Highlights during the year include: - Recognised in the Great Place to Work® index in the UK Large Employer category in 2025 - Met the recommendations of the FTSE Women Leaders Review and continue to rank in the top ten in the FTSE 250 - Reduced our combined Scope 1 and 2 emissions by 2%, however, Group emissions increased by 14% year-on-year, reflecting business growth and an increase in emissions factors within Scope 3 where verified third-party primary data was unavailable - Increased the volume of pre-owned watches sold by 8% YoY and continued to expand our team of accredited watchmakers and technicians to support circularity - Received an A-score in the CDP (Carbon Disclosure Project) climate change questionnaire, demonstrating leadership for environmental performance and transparency - Mappin & Webb was granted a Royal Warrant by Her Majesty Queen Camilla following an application, supported by a sustainability assessment - £10.0 million donated by the Group to charitable causes since 2021, of which £9.3 million was contributed to The Watches of Switzerland Group Foundation. The Foundation provides essential support to local charities focusing on poverty, the advancement of education and relief to those in need - Headline sponsor for The King's Trust Change a Girl's Life campaign for the second consecutive year - Volunteering hours increased by 52% - Successfully maintained Fair Tax Mark certification since 2022 THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 8 --- ![img-20.jpeg](img-20.jpeg) “As we look ahead, we remain confident in the strength of our business model, the quality of our showroom pipeline and the resilience of demand for leading luxury watch and jewellery brands.” BRIAN DUFFY CEO #### OUTLOOK FOR FY27 We enter FY27 with good momentum, building on a year in which we delivered revenue and profit ahead of our previous expectations. Our Guidance for the 52-weeks of FY27 (pre-IFRS 16) is based on: - Visibility of supply through calendar year 2026, pricing and margin from key brands - No significant changes in tax burden - Guidance reflects confirmed showroom refurbishments, openings and closures, and excludes uncommitted capital projects and acquisitions | Constant currency revenue growth | 5% - 10% | | --- | --- | | Adjusted EBIT margin % | 40 - 80bps expansion from FY26 | | Capital expenditure | £60 - £70 million | | Free cash flow conversion | c.70% | The equivalent guidance on an IFRS 16 basis is: | Adjusted EBIT margin % | 40 - 80bps expansion from FY26 | | --- | --- | The Group is exposed to movements in the £/$ exchange rate when translating the results of its US operations into Sterling. The actual exchange rate for FY26 was $1.34. The Group is mindful of the geopolitical environment and will continue to closely monitor the situation and any wider impact on global consumer sentiment, but has minimal direct exposure to the Middle East, or tourist consumers. While the external environment remains uncertain, the Group is well positioned. We have a clear strategy, strong brand partnerships and a compelling pipeline of showroom projects and development opportunities. Demand for luxury watches and jewellery remains supported by long-term trends, and we remain confident in the Group's prospects. I would like to thank all our colleagues for their continued hard work, professionalism and commitment throughout the year. Their focus on delivering the highest standards of client experience, together with the way they support one another across the Group, remains fundamental to our success and to the strength of our relationships with brand partners and clients. BRIAN DUFFY CHIEF EXECUTIVE OFFICER 13 July 2026 STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 9 --- MARKET REVIEW # WHAT DIFFERENTIATES THE LUXURY WATCH CATEGORY ## A UNIQUE MARKET Led by the most prestigious global brands focused on craftsmanship, heritage, innovation, brand marketing and long-term discipline, achieving a stronger value proposition than most luxury consumer goods categories. ## DEMAND EXCEEDS SUPPLY FOR KEY BRANDS The overall market demand for highly sought after Swiss watch brands exceeds production levels. ## SUPPORTS A MORE CIRCULAR ECONOMY High-quality mechanical luxury watches are often passed down for generations or find new owners over time. Most can be repaired indefinitely and many of the materials they contain are recyclable. ## MULTI-CHANNEL MODEL REQUIRING SHOWROOM COVERAGE Major brands operate Selective Distribution Agreements requiring operation of one or more showrooms in addition to online selling to maintain brand image and meet high service level requirements. ## LONG-STANDING INDUSTRY PRESENCE Strong brand and retailer partnerships are based on many years of experience and category expertise. Brands actively manage distribution through Selective Distribution Agreements. ## SWISS CONCENTRATION Swiss watchmaking remains the benchmark, shaped by generations of precision, craft and horological expertise. A heritage that sets Swiss Maisons apart, limiting threats from emerging technologies and increasing global competition. ## STRONG VALUE RETENTION Rarity, heritage, craftsmanship and precious materials support brand image and value; some products are considered an investment asset class. Historically, prices increase over time, with regular pricing reviews from brands which consider material costs and foreign exchange rates. ## SPECIALIST CATEGORY WITH BROAD APPEAL Specialist for both the manufacturer and the retailer; consumers respond to expertise, authority and heritage. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2022 10 --- ![img-21.jpeg](img-21.jpeg) ## KEY REASONS TO INVEST 1 Market with attractive, long-term structural growth dynamics. Resilient demand exceeding supply for key brands. 2 2. Track record of strong revenue growth, ahead of underlying markets and further opportunities for growth across our strategic pillars. 3 Resilient long-term margin profile. 4 Good cash conversion supporting ongoing balance sheet strength. 5 Disciplined capital allocation: prioritising organic and inorganic growth, with surplus capital returned to shareholders. 6 Long-term, compounding shareholder returns. ESIC REPORT SOPERNANCE REPORT FINANCIAL STATEMENTS --- MARKET REVIEW CONTINUED # THE LUXURY WATCH MARKET HAS A STRONG TRACK RECORD OF GROWTH... The luxury watch industry benefits from a well-established and resilient market structure, supported by a track record of consistent long-term growth, sustained investment, and elevated innovation. **The Group estimates global retail sales of luxury¹ watches were approximately £50.3 billion in calendar year 2025. This is based on the estimated retail value of Swiss luxury watches (Swiss exports and the Swiss market), repairs and services, and the contribution from non-Swiss luxury watch brands.** The global luxury watch market has delivered long-term growth, with a 25-year CAGR of 4.9% (2025 v 2000) benefiting from a well-established and resilient market structure, supported by a track record of sustained investment and elevated innovation. Of the 4.9% growth in luxury watch exports, +4.1% related to increases in average selling prices (ASP)². Watches at the luxury end of the market have outperformed lower priced segments and represent 95% of the value of global Swiss watch exports in calendar year 2025. The US has seen significant increases in Swiss watch exports in recent years, while the UK has remained ahead of the global average, as can be seen in the graph (below). This has been supported by continued investment and elevation of luxury watch retailing in the US market. In contrast, the absence of VAT-free shopping in the UK continues to weigh on international tourist spend, with some demand directed to markets where tax-free incentives are available. RESILIENT LONG-TERM GROWTH IN SWISS WATCH EXPORTS (CALENDAR YEARS) ![img-22.jpeg](img-22.jpeg) SWISS WATCH EXPORTS GROWTH (WRISTWATCHES PRICED OVER CHF 500) APRIL 2025 TO MARCH 2026 ![img-23.jpeg](img-23.jpeg) 1 Luxury is defined as exports >CHF 500 2 Average selling price is total export value divided by number of units 12 THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 --- # ...WHILE NAVIGATING THROUGH UNPRECEDENTED PERIODS OF VOLATILITY STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS ## The global market experienced a period of volatility during and following the COVID pandemic which normalised in 2023/24. ### COVID (2020-2022) The global pandemic resulted in reduced production from Swiss watch brands in 2020, which led to an increased scarcity of product. At the same time, there was a sharp increase in disposable income as governments introduced lockdowns to slow the spread of the virus. The combined result led to secondary market prices reaching all-time highs in 2021. ### POST-COVID (2022-2024) The increased demand and focus on the luxury watch category led to high recommended retail price (RRP) increases and a shift by some brands towards higher average selling-price products. In the UK, these developments coincided with a post-COVID softening in consumer confidence as discretionary spending moved towards travel and experiences. While this dynamic was far less pronounced in the US, the overall effect contributed to a meaningful decline in Swiss watch volumes among more aspirational consumers and a sharp correction in secondary-market pricing. Luxury watch brands responded with increased product innovation, innovative marketing, normalised RRP increases and a collaborative approach with multi-channel distributors. This helped to stabilise markets, while secondary prices normalised. ### GOLD AND SWISS FRANC STRENGTH (2024 ONWARDS) The sustained strength in gold prices alongside an appreciating Swiss franc has provided a material cost headwind for Swiss luxury watch brands. This has led to selective RRP increases, particularly on precious metal models. Currency movements have also created periods of pricing misalignment across regions, resulting in limited arbitrage opportunities, which brands have addressed through considered pricing actions and disciplined distribution. ### US TARIFFS (2025) On 2 April 2025, under the 'Liberation Day' import tariff package, the US announced a 31% additional tariff on imported Swiss goods. This additional tariff was briefly reduced to 10%, before increasing to 39% on 7 August 2025. Following a deal between the Swiss Government and the US, these additional tariffs were reduced to 15% which was retroactively implemented from 14 November 2025. In response, Swiss luxury watch brands accelerated shipments into the US ahead of the tariff increases, resulting in a pronounced pull-forward of exports, with the Federation of the Swiss Watch Industry data showing shipments rising by +45% year-on-year in July 2025. This dynamic distorted reported export data, contributing to a marginal year-on-year decline on a latest 12-month basis despite continued strength in underlying demand. Allocation of product by the Swiss luxury watch brands to local US authorised distributors was unchanged during this period. As well as increasing the number of units each brand was shipping to the US ahead of the elevated tariff charges, the brands also looked at ways to spread the impact these additional tariffs would have on the consumer, their retail partners and themselves. A number of brands reacted with a combination of RRP increases and retailer margin reductions. Where retailer margins were reduced, the offset from RRP increases ensured that retailer cash margins were maintained or improved. The impact of these periods of disruption and subsequent normalisation is clearly illustrated in the evolution of secondary market pricing over recent years (below). Following the sharp price appreciation experienced during the COVID pandemic, secondary market values corrected materially through 2022 and 2023 before stabilising as supply and demand dynamics normalised. This period underscores the extent of volatility experienced across the luxury watch market in recent years, and the importance of disciplined supply, pricing and distribution in supporting category health over the long-term. ## SECONDARY MARKET PRICE EVOLUTION: 2020–2026 ![img-24.jpeg](img-24.jpeg) Source: WatchCharts ![img-25.jpeg](img-25.jpeg) 13 --- MARKET REVIEW CONTINUED # GLOBAL BRANDS AND SUPPLY-DRIVEN GROWTH Luxury watch brand owners are made up of major independents, large groups and smaller independents, as can be seen below. Our Group provides a large selection of luxury watches covering a wide range of prices and consumer preferences, including the largest and best known brands alongside smaller independent brands. We stock confidently, which provides our clients with a stronger range and availability. We have regular dialogue with our brand partners on current trends, often leading to the development of exclusive partnerships and/or first to market timepieces. # PREVALENCE OF SELECTIVE DISTRIBUTION AGREEMENTS In most markets, distribution of luxury watches takes place under Selective Distribution Agreements; strict, legally binding contracts entered into with brands on a point-of-sale basis. These typically focus retailers by geography and ensure retailers maintain high presentation standards. Selective Distribution Agreements enable brands to manage the number of points of sale and apply qualitative criteria to retailer approval. Product presentation and client experience are closely monitored by brand owners. Globally, the retail market for luxury watches is fragmented, predominantly comprising of a large volume of small retailers. However, consolidation to fewer, better points of sale has been an ongoing trend, particularly in the US market. This trend provides an opportunity for our Group, as we continue to invest in our showroom portfolio and client experience capabilities to remain a trusted partner to luxury watch brands. ![img-26.jpeg](img-26.jpeg) # LOYAL, DIVERSE, MULTI-GENERATIONAL CLIENT BASE Luxury watches attract a set of clients who can become repeat clients, spanning age, income groups and genders. Over the years, there has been an increasingly positive impact from digital and social media appealing to a younger market. The Group invests in digital marketing to attract clients and stimulate interest in the category. Our showroom design, location, marketing and unique client service, appeal to a broad demographic audience. In FY25, the Group acquired the Hodinkee business, the pre-eminent global digital editorial content provider and gateway for luxury watch enthusiasts. Hodinkee currently has 56.1 million views per year and 1.8 million social media followers, having delivered year-on-year growth of 17% and 20%, respectively, in FY26. # GLOBAL BRANDS # Major independents ROLEX PATEK PHILIPPE GENEVE ALGEMAR'S PIGGET BREITLING 1884 TUDOR # Swatch Group OMEGA LONGINES TISSOT BLANCPAIN BREGUET Gieshütte ORIGINAL RADO HAMILTON # Richemont Cartier IWC SCHAFFHAUSEN PANERAI JACUER-LÉCOUVERN VACHERON CONSTANTIN PIAGET # LVMH TAGHeuer HUBLOT ZENITH BVLGARI # Independents GS Grand Sello BOVET ULYSSE NARDIN GRAND PERREGAUX GREUBEL FORSEY JACOB&CO GENEVE Chopard ARMIN STROM ARNOLD&SON PARMIGIANI CHANEL EHJMarsCo GERALD CHARLES BREMDNT DOXA ORIS THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 14 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS ![img-27.jpeg](img-27.jpeg) ## CONTINUOUS PRODUCT INNOVATION AND ADVANCEMENT Luxury watches are characterised by a focus on product innovation and advancement and are normally introduced at prestigious watch fairs in Switzerland. In the US and the UK, there is a strong preference for sports models with the key brands consistently investing to ensure the highest degree of technical (diver, aviation and chronograph) specifications. New product innovations are showcased by luxury watch brands at watch fairs such as Watches and Wonders in Geneva. This year, product innovation focused on evolution rather than revolution, including the revival of historical product from the likes of Cartier (Roadster) and Tudor (Monarch). A number of brands shifted focus towards dial innovations, and from a colour perspective, a continued growth in green dials, but also a noticeable trend in 'Earth' tones. ## GEOGRAPHICAL MARKETS The Group operates in the US and UK markets, two of the major Swiss watch markets. The chart below shows the luxury watch retail sales per capita over the past seven years. On a per capita basis, the UK market has outperformed the US market and all major European markets since 2000. The UK market has the highest per capita retail spend by domestic clients on luxury watches. We believe the differential to other markets reflects retail investment, not consumer behaviour, creating an opportunity to successfully replicate our model in other geographies and building on the success we have delivered in the US to date. The US market is underdeveloped, providing significant growth opportunities for the Group. ### LUXURY WATCH RETAIL SALES PER CAPITA (USD) On a sales per capita basis, the US offers the greatest growth opportunity ![img-28.jpeg](img-28.jpeg) Our key markets Source: Company estimates based on Swiss Watch Export Data 15 --- MARKET REVIEW CONTINUED ## THE US LUXURY WATCH MARKET After a period of underinvestment in the US leading up to 2018, the market has performed strongly and is today the largest global market for Swiss watch exports, overtaking China in 2021. The Group estimates retail sales of luxury watches reached $10.1 billion in calendar year 2025. The US market is led by Rolex with strong market positions of Cartier, Patek Philippe, Audemars Piguet, OMEGA, TUDOR, Breitling, TAG Heuer, IWC Schaffhausen, Jaeger-LeCoultre, Longines and Vacheron Constantin. Additionally, there are also relatively strong market positions for smaller independent brands such as MB&F, Bovet and H. Moser & Cie. US retail distribution has consolidated towards larger showroom formats in major shopping areas, and retail investment by the Watches of Switzerland Group and others has increased. The US market is predominantly domestic, although domestic tourism (e.g. to Florida or Las Vegas) is significant. In recent years, Rolex, Patek Philippe and other brands have been rationalising distribution, reducing the number of agencies to a smaller number of higher-quality retailers. Despite this consolidation at the top end of the market, the broader US luxury watch landscape remains highly fragmented, with c.70% of distribution served by retailers operating one, two or three stores, while the remaining c.30% is concentrated among key multi-door operators including the Watches of Switzerland Group, Bucherer and The 1916 Company. In the period 2000 to 2025, luxury Swiss watch exports to the US increased at a CAGR of 4.4%, accelerating to 11.6% from 2019 to 2025, following the Watches of Switzerland Group's entry into the US market in 2018. ![img-29.jpeg](img-29.jpeg) The US remains the world's largest market for luxury watches. Strong discretionary spending is underpinned by rising wealth generation across the country, alongside increasing consumer interest in the category. Since entering the market in 2018, we have steadily developed our showroom network, which now serves clients across a broad range of locations, as shown opposite. This creates a strong platform for continued expansion in a market where we see significant long-term growth potential. ### LUXURY SWISS WATCH EXPORTS TO THE US (CALENDAR YEARS) ![img-30.jpeg](img-30.jpeg) Swiss Watch Federation statistics. Luxury watches classified as >CHF 500 THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 16 --- US GDP PER STATE 2025 Source: U.S. Bureau of Economic Analysis ![img-31.jpeg](img-31.jpeg) ![img-32.jpeg](img-32.jpeg) # US MARKET HIGHLIGHTS RANKING IN GLOBAL MARKETS FOR SWISS WATCH EXPORTS CALENDAR YEAR 2025 $10.1bn ESTIMATED LUXURY WATCH RETAIL SALES CALENDAR YEAR 2025 17 STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS --- MARKET REVIEW CONTINUED ## THE UK LUXURY WATCH MARKET The UK is the fifth largest market globally for Swiss luxury watch exports. The Group estimates retail sales of luxury watches amounted to £3.6 billion in calendar year 2025. The UK market has been resilient, a testament to a well-invested, disciplined multi-channel market and a highly engaged domestic clientele, which has typically had a preference for the sports luxury watch category. While the removal of VAT-free shopping on 1 January 2021 reduced international tourist spending in the UK luxury watch market, the subsequent increase in domestic demand has helped to support the category's continued strength. For the Group, tourist-driven sales in the UK accounted for 33% of revenue in FY19, compared to less than 5% today, highlighting a significantly more domestically-driven revenue mix. In the period 2000 to 2025, luxury Swiss watch exports to the UK increased by a CAGR of 7.1%. The UK market is made up of national groups, independent jewellers, luxury department stores and boutiques directly operated by the brands. It is led by Rolex, with strong market positions of Patek Philippe, OMEGA, Cartier, Breitling, TAG Heuer, TUDOR, IWC Schaffhausen, Longines and Tissot. ### UK LUXURY WATCH MARKET 2025 ![img-33.jpeg](img-33.jpeg) ![img-34.jpeg](img-34.jpeg) ### LUXURY SWISS WATCH EXPORTS TO THE UK (CALENDAR YEARS) ![img-35.jpeg](img-35.jpeg) Swiss Watch Federation statistics. Luxury watches classified as >CHF 500 THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 18 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS # **Identified climate-related risks and opportunities** Reaching net-zero GHG emissions by 2050 and managing emerging risks associated with a changing climate presents both physical and transition risks, as well as opportunities through adaptation to a low-carbon economy. All identified climate-related risks, opportunities and impacts are captured in our ESG risk register and reviewed annually as part of our risk management process. | Risk | Scope/Function | Time horizon* | Potential business impacts | Group mitigations | Priority areas | Targets | | --- | --- | --- | --- | --- | --- | --- | | **R1** Compliance with environmental legislation **Transition risk:** Policy and legislation | Group – Governance | S / M | Emerging climate-related disclosure laws, such as UK SRS S1 and S2, and increasing compliance requirements are expected to raise the Group's reporting, audit, and adaptation and mitigation implementation costs. Failure to comply with these evolving obligations could lead to fines or penalties, as well as missed investor opportunities and reputational impacts. Operational expenditure required to ensure awareness and compliance. | – Internal resource and governance framework in place to monitor, report and escalate requirements and potential impacts Supported by: – Digital tools, e.g. Governance Risk Platform (GRC) and Agentic AI – External expertise and guidance – Representation in industry bodies – Investment in colleague training | Governance Stakeholder engagement | Full legislative compliance with no non-conformance | | **R2** Energy efficiency and energy resilience **Transition risk:** Market | Group – Direct Operations | S / M | Sustained increases in long-term energy costs and greater volatility in energy supply. | – Implementation of energy efficiency technology, smart metering and energy management systems – On-site energy generation – Securing long-term, fixed price energy contracts to reduce exposure to cost increases and market volatility – Installation of Uninterruptible Power Supplies (UPS) at key sites | Energy security Emissions reduction | Aim to reduce Scope 1 emissions by 42% by 2030 from a FY24 baseline Continue to source 100% renewable energy across our Group to 2050 | | **R3** Changing temperature **Physical risk:** Chronic | Group – Direct Operations | M / L | Increased energy consumption associated with heating and cooling, as well as increased risk of energy blackouts. | – Implementing energy efficiency technologies, such as LED lighting, smart metering and energy management systems – Adopting on-site energy generation – Securing long-term, fixed price energy contracts to reduce exposure to cost increases and market volatility – UPS installed at key sites – Ongoing engagement with landlords to adopt BREEAM or LEED best practices | Energy security Energy consumption reduction | Year-on-year energy reduction per square foot | | **R4** Risk of reputational damage from non-compliance or unsubstantiated environmental claims **Transition risk:** Reputation | Group – Governance | M / L | Customers are increasingly expecting businesses to commit publicly to sustainability measures. Any commitments not met or inaccuracy in claims may lead to negative reputational impacts. | – Continue development and implementation of Climate Transition Plan – Stakeholder engagement with decarbonisation goals, green claims and progress delivering decarbonisation targets – Continue to strengthen procurement practices and supplier selection and retention processes | Emissions reduction Accurate climate-related disclosures and commitments | Accurate climate-related reporting and achieving net-zero targets | 113 --- ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED # TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES | Risk | Scope/Function | Time horizon* | Potential business impacts | Group mitigations | Priority areas | Targets | | --- | --- | --- | --- | --- | --- | --- | | **R5** Extreme weather events **Physical risk:** Acute | UK and US – Supply Chain / Logistics | S / M / L | Our analysis of key third-party logistics sites under both high- and low-carbon scenarios identified potential delivery disruptions. For example, precipitation was identified at two UK supplier sites while in the US extreme heat was reported at one third-party site and cyclones and hurricanes were reported at one third-party site. | – Ability to switch logistics partners and delivery locations – Budget timelines include costs related to increased insurance premiums that may occur – Contractual and legal processes such as long-term purchase agreements and limiting minimum quantity contracts. This ensures sufficient inventory is kept in warehouses controlled by the Group | Supplier engagement | Suppliers on net-zero journey | | **R6** Extreme weather events – cyclone, hurricane, typhoon **Physical risk:** Acute | US – Direct Operations | S / M / L | In the US (particularly Florida) hurricanes occur annually, with potential to disrupt logistics hubs, product deliveries and client fulfilment. | – Contingency plans and physical controls in place within all sites at risk – Insurance policies to cover financial losses, either partially or fully and are based on international spread and our showroom presence – Suppliers able to send products directly to showrooms | Stakeholder engagement | Annual assessment of values associated with the insurance of all locations | | **R7** Extreme weather events disrupting offices and distribution centres **Physical risk:** Acute | Group – Direct Operations | S / M / L | Extreme rainfall could lead to flash flooding and increased fluvial flooding at US and UK sites. | – Showrooms not identified as a ‘stranded asset’ due to short leases <10 years and ability to relocate site if identified as high risk – Risk assessments conducted at individual sites as leases expire, with option to relocate where necessary. Potential new sites also assessed – Budget allocated to maintain and repair any sites impacted by unexpected weather impacts | Stakeholder engagement | Periodic review of new and existing sites | | **R8** Raw material extraction **Physical risk:** Acute | Supply Chain | M / L | Raw material extraction disrupted. For example, through extreme heat. | – Build climate-related clauses into relevant contracts, expand product offering of lower-carbon products, e.g. pre-owned watches and jewellery – Enhanced stakeholder engagement supporting supply chain transition to lower-carbon products – Strengthened procurement processes and data capture improving climate-related decisions | Supplier engagement | Diversification of suppliers through improved procurement practices | \*S = Short-term, M = Medium-term, L = Long-term THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 114 --- To test the resilience of our business strategy and understand which climate-related risks and opportunities could have a material financial impact on our Group, we have conducted qualitative and quantitative CSA across our business operations. This allows us to highlight specific climate-related risks and opportunities, test the robustness of our assets and business strategy across a range of potential temperature outcomes, and understand where and when our value chain might be impacted. Our climate scenarios reflect a broad range of possible climate outcomes and use data from publicly available third-party sources to ensure active and holistic management of all climate-related risk components. Our emissions reduction pathways consider both the direct and supply chain impacts on biodiversity, as well as the effects of a changing climate on our business initiatives. | Scenario | Transition scenario | Physical scenario | | --- | --- | --- | | **1.5°C** – Rapid transition to a global low-carbon economy – Unified regulations and ambitious climate policies are implemented immediately and smoothly | NGFS net-zero GHG emissions by 2050 | Not considered* | | **Below 2°C** – Steady transition to a global low-carbon economy – Required by the TCFD recommendations – Aligns with the Group's net-zero GHG emissions target | NGFS below 2 degrees | IPCC SSP1-2.6 | | **2-3°C disorderly transition** – Delayed and disorderly transition leading to notable transition and physical impacts | NGFS delayed transition | IPCC SSP2-4.5 | | **4°C** – Business-as-usual emissions – Assumes climate inaction – No additional policies are implemented to address the climate agenda and temperatures rise to 4°C above pre-industrial levels | NGFS current policies | IPCC SSP5-8.5 | * Below 2°C scenario has been used which is also a low-carbon scenario. During FY26, we identified emerging climate-related transition risks, including the potential for sustained increases in long-term energy costs, greater volatility in energy supply and the risk of reputational damage arising from non-compliance or unsubstantiated environmental claims. Our physical climate-related risks were also assessed to make sure they remain relevant and are managed appropriately. In partnership with environmental consultants, we deployed SE Advisory's specialised Climate Risk Platform to map each of our sites against the 28 physical climate hazards listed by the EU taxonomy. Each site was screened for exposure to impacts such as flooding, heatwaves and wildfires. The results showed that material physical climate risks (hurricanes, flooding, extreme heat and changing temperature) first identified in FY22, remain applicable and material to the Group. However, a new risk of water stress within a number of US sites was flagged as a potential material issue over the long term (>10 years). Given we have not assessed water stress before, further investigations will be conducted to establish the full impact on our operations. All risks identified in FY26 will be subject to further analysis, and any updates to materiality and financial impacts will be incorporated into future reporting. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 115 --- ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED # TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES ## HIGH CLIMATE-RELATED RISKS RELATED TO OUR DIRECT OPERATIONS ### Changes in climate-related risks and opportunities During the period, we refreshed our assessment of climate-related risks and opportunities in line with evolving guidance, improved data availability and our objective to provide a more concise, decision-useful report. As a result, the following risks disclosed in our Annual Report and Accounts 2025 have been updated or are no longer disclosed as principal climate-related risks to the Group. All identified risks and opportunities continue to be monitored within the Group’s risk management frameworks and will be redisclosed if re-identified as material in future periods. | | Risk | Change | Reason for change | | --- | --- | --- | --- | | R1 | Cost of non-compliance with environmental legislation | Compliance with environmental legislation | Combined two separate risks to streamline reporting. | | R4 | Expectations for preparedness and responsible conduct from stakeholders, including investors, lenders and clients | Risk of reputational damage from non-compliance or unsubstantiated environmental claims | Preparedness is now considered business-as-usual and too broad to provide meaningful insight. This risk has been updated to focus specifically on reputational damage from unsubstantiated claims. | | R5 | A changing climate and extreme weather events such as heatwaves have the potential to affect logistics hubs | Removed | Not considered a principal climate risk. Adaptation measures in place. | | Not material | The Group is liable to pay carbon tax on energy consumption and direct emissions (fleet) and indirect emissions (supply chain) | Removed | Carbon tax assessment conducted in 2021, with a subsequent tax workshop in 2024 concluding minimal impact. Risk of increased energy costs and supply volatility are now more relevant and material than the carbon tax. | | Not material | Changing consumer preferences | Removed | It is now captured under risk of reputational damage from non-compliance or unsubstantiated environmental claims. | | | Opportunity | Change | Reason for change | | O1 | Promoting the prolonged lifetime of watches and jewellery to encourage clients to retain and repair watches and jewellery instead of disposing of them | Lower-carbon products | Broadening product range to include lower-carbon products such as lab-grown diamonds. | | O2 | Proactive collaboration with suppliers to reduce energy | Proactive collaboration with suppliers to reduce emissions | Mitigation measures in place to reduce the cost of energy contracts. Deep supply chain emissions reductions necessary to achieve net-zero SBTs. | THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 116 --- ## ACTUAL AND POTENTIAL IMPACT OF HIGH CLIMATE-RELATED RISKS The following table includes our analysis of current high-rated climate-related risks and opportunities. We recognise more significant impacts will be experienced for climate-related physical risks under high-carbon scenarios, whereas transition risks impacts will be more significant under low-carbon scenarios. | | | Time horizon | | | | | --- | --- | --- | --- | --- | --- | | R1. Group – Governance | Risk category | Scenario | Short | Medium | Long | | **LEGISLATIVE** Compliance with environmental legislation | Transition | ● <2°C | | | | | | | | Magnitude of impact post-mitigation: Negligible | Likelihood of impact post-mitigation: Likely | Financial impact post-mitigation: <1% EBIT | | | | Time horizon | | | | | R2. Group – Direct Operations | Risk category | Scenario | Short | Medium | Long | | **ENERGY COSTS AND SUPPLY** Energy efficiency and energy resilience | Transition | ● <2°C | | | | | | | | Magnitude of impact post-mitigation: Negligible | Likelihood of impact post-mitigation: Moderate | Financial impact post-mitigation: <1% EBIT | | | | Time horizon | | | | | R3. Group – Direct Operations | Risk category | Scenario | Short | Medium | Long | | **CHRONIC PHYSICAL** Changing temperature | Physical | ● <2°C ● 4°C | | | | | | | | Magnitude of impact post-mitigation: Negligible | Likelihood of impact post-mitigation: Moderate | Financial impact post-mitigation: <1% EBIT | | | | Time horizon | | | | | R4. Group – Governance | Risk category | Scenario | Short | Medium | Long | | **REPUTATION** Risk of reputational damage from non-compliance or unsubstantiated environmental claims | Transition | ● <2°C | | | | | | | | Magnitude of impact post-mitigation: Moderate | Likelihood of impact post-mitigation: Negligible | Financial impact post-mitigation: 1-5% EBIT | | | | Time horizon | | | | | R6. Group – Direct Operations | Risk category | Scenario | Short | Medium | Long | | **ACUTE PHYSICAL** Extreme weather events – cyclone, hurricane, typhoon | Physical | ● <2°C ● 4°C | | | | | | | | Magnitude of impact post-mitigation: Minor | Likelihood of impact post-mitigation: Likely | Financial impact post-mitigation: 1-5% of EBIT | STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 117 --- ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED # TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED | R7. Group – Direct Operations | Risk category | Scenario | Time horizon | | | | --- | --- | --- | --- | --- | --- | | | | | Short | Medium | Long | | **ACUTE PHYSICAL** Extreme weather events disrupting offices and distribution centres | Physical | ● <2°C ● 4°C | | | | | | | | Magnitude of impact post-mitigation: Minor | Likelihood of impact post-mitigation: Likely | Financial impact post-mitigation: 1-5% of EBIT | | R8. Supply Chain | Risk category | Scenario | Time horizon | | | | --- | --- | --- | --- | --- | --- | | | | | Short | Medium | Long | | **ACUTE PHYSICAL** Raw material extraction | Physical | ● <2°C ● 4°C | | | | | | | | Magnitude of impact post-mitigation: Minor | Likelihood of impact post-mitigation: Likely | Financial impact post-mitigation: 1-5% of EBIT | # ACTUAL AND POTENTIAL IMPACT OF HIGH CLIMATE-RELATED OPPORTUNITIES | O1. Group – Governance | Opportunity category | Possible impact | Time horizon | | | | --- | --- | --- | --- | --- | --- | | | | | Short | Medium | Long | | **DOWNSTREAM** Lower-carbon products | Products / Services | 5-10% EBIT | | | | | **DETAIL** Enhanced brand differentiation through the sale and promotion of low-carbon products and responsible procurement. | | | **Strategy to realise opportunity** – Drive increased sales of pre-owned watches and jewellery through investment in marketing, enhanced digital channels and in-showroom displays – Broaden low-carbon product offering, such as lab-grown diamonds – Improve product traceability and awareness through procurement decisions, supply chain engagement and industry collaboration | | | | O2. Group – value Chain | Opportunity category | Possible impact | Time horizon | | | | --- | --- | --- | --- | --- | --- | | | | | Short | Medium | Long | | **SUPPLY CHAIN** Proactive collaboration with suppliers to reduce emissions | Products / Services | <1% EBIT | | | | | **DETAIL** The Group has an SBT to reduce Scope 3 emissions by 42% by 2030 from a FY24 baseline. Achievement of this target will support brand differentiation and reduce any future impact of carbon pricing. | | | **Strategy to realise opportunity** – Continuous improvement in supplier data as we improve our reporting and action internal decarbonisation plans – Improving upstream and transportation data to transition away from spend to actual activity data – Continued engagement with logistics suppliers to include route optimisation, implementation of sustainable alternative aviation fuel and the future electrification of transportation fleets – Improving colleague commuting response data and incentivising more sustainable commuting methods | | | THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 118 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS | O3. Group – energy efficiency | Opportunity category | Possible impact | Time horizon | | | | --- | --- | --- | --- | --- | --- | | | | | Short | Medium | Long | | **DIRECT OPERATIONS** Energy efficiency in showrooms, offices and distribution centres and use of renewable energy in showrooms and offices | Energy source and resource efficiency | <1% EBIT | | | | | **DETAIL** Use of lower-emission sources of energy. Reduction in energy consumption. | | | **Strategy to realise opportunity** – Invest in initiatives to reduce our operational impact throughout our US and UK estate – 100% of properties powered by renewable electricity backed by guarantees of origin – 94% of properties across our Group use LED lighting and this is standard in all new properties – EnOS™ system delivered a 19% average reduction in energy consumption across 45 contracted sites, with 79.8 tCO_{2}e reduced and approximately £115,000 in cost savings delivered across contracted sites – Solar array on our Carlton Park Support Centre complete and set to generate renewable energy on-site and reduce energy costs by over £16,500 per annum | | | ### Business resilience in summary As jurisdictions progress toward lower-carbon economies, the Group anticipates a continued rise in the breadth and complexity of climate-related disclosure rules and environmental legislation, such as the upcoming UK SRS S1 and S2 disclosures. These emerging obligations, which increasingly include enhanced reporting expectations, verification requirements and jurisdiction-specific mandates, may drive higher internal costs associated with data gathering, assurance, and compliance activities. Meeting these evolving requirements may require additional resource investment, new processes, and/or system upgrades. Conversely, any failure to comply could expose the Group to regulatory sanctions, limit access to certain investors, or create reputational challenges. The Group's Sustainability function, led by an experienced Head of Sustainability and ESG, is supported by established governance forums, specialist external advisers, and digital tools to monitor regulatory changes and assess their implications for the business. Regulatory obligations are actively tracked, integrated into planning cycles, and supported by structured decision-making frameworks to ensure the Group responds promptly and appropriately to new requirements. AI-enabled platforms assist in identifying relevant legislative changes, assessing potential compliance gaps, and escalating issues through governance processes for timely management action. Recent enhancements to our procurement function and the introduction of an AI-supported supply chain management system, help ensure our partners are aligned with our Supplier Sustainability Standards, and broader compliance commitments detailed within our Supplier Operating Manual. Our operation is not highly energy intensive, reducing our vulnerability to immediate impacts related to the climate transition impacts and our low direct emissions profile by (approximately 2%) and asset-light retail model support our ability to transition to ethically sourced, low-impact products. Across our portfolio, showrooms are typically located in major global cities with robust infrastructure, and our logistics operations are resilient due to the ability to quickly adapt to change. Our assessments also found key suppliers have well-established climate risk mitigation and adaptation actions in place, which is supported by findings from our supplier screening capability provided by Agentic AI technology. In FY27, we aim to better understand the risk exposure of our key brand partners to extreme heat in sourcing locations and pass through cost increases resulting from higher energy costs and carbon pricing, with the aim of fully understanding our vulnerability and overall risk to these climate hazards. 119 --- ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED # TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED METRICS AND TARGETS TCFD (9) Metrics to assess climate-related risks and opportunities in line with strategy and risk management process CFD (7) KPIs used to assess progress of targets used to manage climate-related risks and realise climate-related opportunities and a description of the calculations on which those key performance indicators are based TCFD (10) Scope 1, Scope 2, and Scope 3 GHG emissions and related risks TCFD (11) Targets to manage climate-related risks and opportunities and performance against targets CFD (8) Targets used to manage climate-related risks and realise climate-related opportunities and of performance against those targets We use a range of quantitative and qualitative metrics to assess and manage climate-related risks and opportunities across our operations and value chain, which are integrated into our risk management and strategic decision-making processes. This includes the measurement and reporting of our Scope 1 (direct), Scope 2 (indirect) and Scope 3 (value chain) GHG emissions in accordance with the GHG Protocol and measuring and monitoring energy use across our portfolio. In January 2026, the SBTi validated the following net-zero goals aligned to a 1.5°C trajectory. OVERALL NET-ZERO TARGET: The Group is committed to achieving net-zero greenhouse gas emissions across the value chain by 2050. NEAR-TERM TARGETS - Reduce absolute Scope 1 GHG emissions 42% by 2030 from a FY24* base year - Source 100% renewable electricity through to 2030 - Reduce absolute Scope 3 GHG emissions 42% by 2030 from a FY24* base year LONG-TERM TARGETS - Reduce absolute Scope 1 GHG emissions 90%** by 2050 from a FY24* base year - Source 100% renewable electricity through to 2050 - Reduce absolute Scope 3 GHG emissions 90%** by 2050 from a FY24* base year * Engagement with the SBTi during the net-zero verification process resulted in a change of baseline year from FY20 to FY24. This change aligns with updated SBTi guidance and allows the Group to measure performance relative to the scale of our current operations and gauge future performance against a higher quality dataset. ** We will aim to offset the residual 10% of emissions through permanent removal and storage of carbon. As part of our strategy to achieve net-zero GHG emissions by 2050, we have implemented several emission reduction initiatives across our operations and value chain, including sourcing 100% renewable energy backed by guarantees of origin across our Group, implementing an energy management system in sites with the highest energy consumption across the US and UK, transitioning to a hybrid or electric vehicle fleet, introducing fully recyclable packaging and engaging suppliers with our goals through improved procurement practices and supply chain engagement. Our existing loan facility is aligned with our near-term science-based emission reduction trajectory and circularity goals, which are supported by the ESG bonus underpin and colleague incentives. Please see page 184 for additional details on how sustainability targets influence remuneration. During FY26, we met our goal to maintain or improve our B rating, achieving an A- for disclosure and an A for supply chain engagement. We continue to review our performance and build further areas of improvement into our Climate Strategy as we strive to achieve net-zero emissions in line with a credible Climate Transition Plan aligned with the recommendations of the Transition Planning Taskforce. Metrics to assess climate-related risks and opportunities Goals used to manage climate-related risks and opportunities can be found within the right-hand column of our identified climate-related risks and opportunities table on pages 113 to 119. The following table summarises key metrics and performance indicators used to monitor the management of high climate-related risks and opportunities. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 120 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS | Risk | Scope | Metrics to monitor risks | Targets to monitor risks | FY24 | FY25 | FY26 | YoY trend | | --- | --- | --- | --- | --- | --- | --- | --- | | R1 Compliance with environmental legislation | Group | Review alignment with climate-related disclosures and compliance requirements globally, where applicable | Full legislative compliance with no non-conformances | Compliant | Compliant | Compliant | ● | | R2 Energy efficiency and energy resilience | Group | Reduce energy consumption (per sq ft) year-on-year | Transition to 100% renewable energy wherever possible (including landlord energy supplies) by 2025 | 70% | 100% | 100% | ● | | R3 Changing temperature | Group | Monitor and regulate HVAC systems at an asset level | % energy reduction across 45 contracted sites with EnOS™ from FY25 base year | – | Baseline | -19% | ● | | R4 Risk of reputational damage from non-compliance or unsubstantiated environmental claims | Group | Deliver training on green claims for all sourcing, marketing and client-facing colleagues | All relevant colleagues receive training on green claims | – | – | Baseline | ● | | R5* | | | | | | | | | R6 Cyclone, hurricane, typhoon | Group | Monitoring the cost of extreme weather damage across sites on an annual basis | Annual assessment of value associated with the insurance of all locations | Complete | Complete | Complete | ● | | R7 Extreme weather events disrupting offices and distribution centres | Group | Strategic sites reviewed annually and appropriate contingency plans in place until lease expiry | All properties reviewed annually for exposure to extreme weather events | 50% | 100% | 100%** | ● | | R8 Raw material extraction | Supply Chain | Engagement with brand partners and other suppliers to range more lower-carbon products | Increase sales of lab-grown diamonds year-on-year from a FY26 baseline | – | – | Baseline | ● | | O1 Lower carbon products | Products | Increased sales of lower-carbon products | Increase sales of pre-owned watches year-on-year | Baseline | +39% | +21% | ● | | O2 Proactive collaboration with suppliers to reduce emissions | Supply Chain | 42% reduction in Scope 3 emissions by 2030 from a FY24*** baseline | Annual reduction in Scope 3 intensity ratio*** | Baseline | -1% | +4% | ● | | O3 Energy efficiency in showrooms, offices and distribution centres | Group | Reduce Scope 1 & 2 intensity ratio*** | Scope 1 and 2 intensity ratio*** | Baseline | +3% | -12% | ● | Key ● Improved/Compliant ● No change ● Missed target * Risk R5 has not been included in the above table as it is no longer considered a principal climate risk as reported on page 116 ** Excludes four newly acquired Deutsch & Deutsch showrooms *** Baseline updated to 2024 in line with net-zero targets *** tCO₂e per £'000 revenue ## Changes | FY25 metric | FY26 change | Reason for change | | --- | --- | --- | | Increased energy requirements: a) % of electricity from renewable sources b) Number of properties we control fitted with LED lighting removed | a) Energy reduction across sites equipped with EnOS™ technology b) Removed | Transitioned to 100% renewable energy across our Group in FY25. New metric measures ROI of energy management systems (EnOS™). LED lighting now standard in properties we control and where installation is financially and practically viable. | | Changing consumer preferences: a) Number of product repairs, servicing and sales of pre-owned watches as a % of new watch sales b) 50% of product suppliers to align with relevant, well-recognised sustainability standards or certifications by 2025 | a) Increase sales of pre-owned watches year-on-year from a FY24 baseline b) Removed | Updated to reflect change in strategy to sell more affordable luxury watches and align with new ESG bonus underpin target, approved by the Remuneration Committee in FY26. 67% of suppliers align with well-recognised sustainability standards or certifications. A new metric to support our goal to offer clients more lower-carbon products has been introduced. | | Raw material extraction disrupted | Year-on-year increase in avoided emissions through increased sales of lower-carbon products | Updated metric to support changing consumer preferences and reporting requirements, as well as sales of lower-carbon products such as verified lab-grown diamonds. | | Carbon price introduced | Risk of reputational damage from non-compliance or unsubstantiated environmental claims | Risk of increased energy costs and supply volatility are now more relevant and material to the Group than carbon tax. | 121 --- ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED # TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES EMISSIONS TABLE | Global GHG emissions data | FY – 2026 | | | | FY – 2025 | | | | FY – 2024 baseline | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK | Europe | US | Total | UK | Europe | US | Total | UK | Europe | US | Total | | **Scope 1:** Direct combustion from owned and controlled sources (tCO_{2}e) | 321 | 3 | 136 | **460** | 194 | 0 | 59 | **252** | 162 | – | 85 | **247** | | **Scope 2:** Indirect emissions from the generation of purchased electricity, heat, steam or cooling (Location-based) (tCO_{2}e) | 1,875 | 5 | 1,924 | **3,803** | 2,292 | 19 | 1,797 | **4,108** | 2,194 | 29 | 1,844 | **4,067** | | **Scope 2:** Indirect emissions from the generation of purchased electricity, heat, steam or cooling (Market-based) (tCO_{2}e) | – | – | – | – | – | – | – | – | – | 33 | 1,574 | **1,607** | | **Total Gross Scope 1 and 2 (tCO_{2}e) Location-based** | **2,195** | **8** | **2,060** | **4,263** | **2,486** | **19** | **1,855** | **4,360** | **2,356** | **29** | **1,929** | **4,314** | | *Total Gross Scope 1 and 2 (tCO_{2}e) Market-based* | 321 | 3 | 136 | **460** | 193 | 0 | 59 | **252** | 162 | 34 | 1,659 | **1,855** | | **Total KWh (Electricity, gas and fleet)** | **10,957,851** | **50,048** | **5,599,486** | **16,607,385** | **11,489,198** | **174,752** | **5,272,306** | **16,936,256** | **11,144,098** | **264,590** | **5,285,657** | **16,694,345** | | **Scope 3 emissions** | | | | | | | | | | | | | | **Category 1** – Purchased Goods and Services^{(1)} | 116,537 | 33 | 115,327 | **231,897** | 103,286 | 541 | 97,276 | **201,103** | 100,035 | 988 | 103,471 | **204,494** | | **Category 2** – Capital Goods^{(2)} | 9,646 | – | 14,289 | **23,935** | 9,434 | – | 12,059 | **21,493** | 16,734 | 555 | 6,147 | **23,436** | | **Category 3** – Fuel- and energy-related activities^{(3)} | 636 | 2 | 480 | **1,118** | 684 | 8 | 433 | **1,125** | 744 | 16 | 435 | **1,195** | | **Category 4** – Upstream Transportation and Distribution^{(4)} | 321 | 0 | 2,473 | **2,794** | 423 | 5 | 967 | **1,395** | 781 | 10 | 1,604 | **2,395** | | **Category 5** – Waste Generated in Operations^{(5)} | 1.31 | 0.0 | 0.34 | **2** | 5 | 0 | 1 | **6** | 8 | 0 | 2 | **10** | | **Category 6** – Business Travel^{(6)} | | | | **1,750** | | | | **1,654** | – | – | – | **2,362** | | **Category 7** – Employee Commuting^{(7)} | 2,565 | 2 | 1,052 | **3,619** | 3,104 | 41 | 933 | **4,078** | 1,845 | 918 | 121 | **2,884** | | **Category 11** – Use of Sold of Products^{(8)} | | | | **26** | | | | **10** | – | – | – | **6** | | **Category 12** – End-of-life treatment of Solid Products^{(9)} | 23 | 0 | 7 | **30** | 30 | – | 7 | **37** | 109 | 32 | 1 | **142** | | **Total Gross Scope 3 (tCO_{2}e)** | | | | **265,171** | | | | **230,901** | | | | **236,924** | | **Total Gross Emissions (tCO_{2}e) Location-based** | | | | **269,434** | | | | **236,691** | | | | **241,238** | | **Total Gross Emissions (tCO_{2}e) Market-based** | | | | **265,631** | | | | **232,582** | | | | **238,779** | | Emission intensities | FY – 2026 | | | FY – 2025 | | | FY – 2024 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | UK and Europe | US | Total | UK and Europe | US | Total | UK and Europe | US | Total | | Revenue (£'000) | 900,700 | 927,200 | **1,827,900** | 865,874 | 785,627 | **1,651,501** | 846,043 | 838,360 | **1,684,403** | | Scope 1 & 2 Intensity Ratio (tCO_{2}e per £'000 revenue) | 0.0024 | 0.0022 | **0.0023** | 0.0029 | 0.0024 | **0.0026** | 0.0028 | 0.0023 | **0.0026** | | Scope 3 Intensity Ratio (tCO_{2}e per £'000 revenue)^{*} | | | **0.1451** | | | **0.1398** | | | **0.1407** | | Scope 3 Intensity Ratio (tCO_{2}e per Sqf)^{*} | | | **0.4233** | | | **0.2895** | | | **0.3215** | | Total Emissions Intensity Ratio (tCO_{2}e per £'000 revenue) | | | **0.1474** | | | **0.1433** | | | **0.1432** | | **Total Emissions Intensity Ratio (tCO_{2}e per Sqf)** | | | **0.4301** | | | **0.2968** | | | **0.3274** | \* Calculated as Group Figure. Certain FY25 and FY24 Scope 3 comparative figures have been re-stated where required by the methodology detailed on the next page THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 122 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS ## Methodology The Group's approach to calculating and reporting its Greenhouse Gas (GHG) emissions follows the WRI/WBCSD GHG Protocol Corporate Accounting and Reporting Standards (Revised) on how to measure and monitor GHG emissions. Scope 1 and 2 emissions have been reported above where the Group has operational control of a property or an asset. This includes properties which the Group operates but which are not included as leases within the financial statements on account of the substitution rights the landlords have (as noted within note 1 of the Consolidated Financial Statements). The Group uses six external data sources for emissions factors, being: 1. UK Government GHG conversion factors for company reporting (2025 Department for Business, Energy & Industrial Strategy (BEIS) condensed set, full set and methodology). These are used to convert our car fleet mileage to kWh and tCO₂e, and our electricity, gas and refrigerant usage to tCO₂e. 2. US Environmental Protection Agency (EPA) (eGRID) emissions factors for greenhouse gas inventories for US electricity generation (eGRID 2025). 3. Manufacturers' emissions factors for cars, uplifted for the UK real-world factor (2025 BEIS Government GHG conversion factors for company reporting). 4. European Environment Agency GHG emission intensity for conversion of electricity kWh to tCO₂e for Denmark and Germany. 5. CEDA ("Comprehensive Environmental Data Archive") EEIO (Environmentally-Extended Input Output) country specific spend-based emission factors. Where the country the service took place was known, purchaser price country specific emissions factors were used, and if not, U.S. based producer price emissions factors were used. All Scope 3 emission calculations follow the guidelines and methodologies that are outlined in the Greenhouse Gas Protocol. The Greenhouse Gas Protocol is the most widely used greenhouse gas accounting standard. It provides a framework for businesses and governments to measure and report their greenhouse gas emissions. See below more information regarding the methodology and data sources that were used for the Scope 3 calculations. For Category 1, pre-owned emissions are excluded 1. A combination of supplier-specific data using CDP and Annual Report data, alongside spend-based emission factors from the Environmentally Extended Input Output CEDA 2025 version database have been employed for the emission calculations. 2. Spend-based emission factors from the Environmentally Extended Input Output CEDA 2025 database have been employed for the emission calculations. 3. Well-To-Tank and Transmission (WTT) and Distribution (T&D) emissions have been calculated using the BEIS and IEA emission factors for the Group's electricity, natural gas and fuel used in company owned vehicles. 4. A combination of BEIS 2025 freight and Well-To-Tank (WTT) freight emission factors, alongside CEDA 2025 spend-based emission factors have been utilised to complete the calculations for Category 4 – Upstream Transportation & Distribution. 5. Emissions related to the Group's offices and showrooms' waste disposal activity. Emissions calculations have taken into consideration the share of waste landfilled (1%) and the share of waste diverted from landfill (99%). BEIS emission factors have been used. Moreover, no waste data was provided for Roberto Coin; however, it is included in the purchase ledger. 6. Business travel emissions considers the emissions from Hotel Stays, Flights, Taxi rides as well as Tube/Rail journeys. A combination of both CEDA, 2026 for spend-based and BEIS emission factors, for the distance based calculations, was used. 7. Home working emissions have been calculated using a mix of assumption-based calculations for homeworking using EcoAct's proprietary Homeworking emissions Whitepaper (https://info.eco-act.com/en/homeworking-emissions-whitepaper-2020). Employee commuting was calculated using the commuter survey provided by WOSG, to create estimates per FTEs in each region and utilising BEIS emissions factors. 8. Emissions related to the energy consumed from the Group's Quartz, Smart, and Other watches that require electricity for the charging of their battery. Total quantity per watch type has been multiplied by emission factors calculated based on publicly available data and Life Cycle Assessments 9. Emissions relating to the disposal of product packaging. BEIS emission factors are used for UK operations, while EPA factors have been used for US operations; these have been applied to packaging quantities. To note that emissions relating to the disposal of watches and jewellery have been excluded from the calculation, as these products are high in value and are either repurposed or resold. The Scope 1, 2 and 3 emissions and energy consumption data for FY26 and the restated FY24 emissions have been independently assured through a limited assurance engagement conducted in accordance with International Standard on Assurance Engagements (ISAE) 3410 'Assurance Engagements on Greenhouse Gas' by BDO LLP. 123 --- ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED # TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES CONTINUED EMISSIONS REBASELINING POLICY The baseline for our metrics is FY24. In line with the Greenhouse Gas Protocol, to ensure fair comparison over time, the Group will rebaseline previously reported figures in subsequent annual reporting, when a material change occurs due to: - Structural changes that affect the inventory boundary (such as mergers, acquisitions or divestments) - Changes in calculation methodologies - Granulation (such as improvements in data quality) - Scope of emissions boundary changing - Identification of historical errors The Group defines a material difference, which would trigger a rebaselining exercise, as one resulting in a variance of greater than or equal to 5% as per best practice guidance from the SBTi. ![img-36.jpeg](img-36.jpeg) THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 124 --- # GOAL AND STRATEGIES The timeline below summarises progress and key steps taken by the Group to ensure climate-related risks and opportunities are identified and managed in a structured, transparent and measurable way: ![img-37.jpeg](img-37.jpeg) STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 125 --- THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 ENVIRONMENTAL SOCIAL AND GOVERNANCE CONTINUED ![img-38.jpeg](img-38.jpeg) --- ![img-39.jpeg](img-39.jpeg) # OUR PRODUCTS Our supply chain is integral to our business, with our long-term success dependent on our ongoing ability to build trusted supplier relations, source the highest-quality luxury watches and jewellery and delight clients with reputable products that are verifiably safe, ethical and environmentally sustainable. Supply chain transparency is a key priority for the Group as it provides us with the foundation for delivering our sustainability strategy, including our transition to net-zero and supporting a more circular economy. Understanding multi-tier supply chains also enables us to identify, assess and mitigate risks, while supporting compliance with evolving regulatory requirements and industry standards. In addition, it strengthens product traceability, supplier accountability and responsible sourcing practices, which are increasingly important to our stakeholders. The Group also recognises compliance risks related to service providers we contract with and takes steps to identify and mitigate them. These suppliers support our organisation within areas including the cleaning of our showrooms and support centres, as well as construction, waste management, events and hospitality. # GOALS AND STRATEGIES # GOALS - Improve our traceability and sourcing standards - Promote the sustainable attributes of our watches and jewellery - Increase sales of lower-carbon products year-on-year from a FY24 baseline # STRATEGIES # WE ADVOCATE FOR OUR INDUSTRY By proactively promoting the interests and responsibilities of the luxury watch and jewellery sectors in our markets # WE EARN TRUST & CONFIDENCE By being true to ourselves and honest and transparent with our colleagues, our clients and our brand partners # WE TREAT EVERYONE WITH RESPECT By working together to cultivate a secure and supportive workplace, with equal opportunities and respect # FY26 KEY PERFORMANCE HIGHLIGHTS - Continued to strengthen our procurement practices to support sustainability goals and mitigate against related risks, including a revision of our Supplier Operating Manual - Increased sales of lower-carbon products, including lab-grown diamonds and pre-owned watches - Mappin & Webb awarded Royal Warrant to Her Majesty Queen Camilla 8% INCREASE IN NUMBER OF PRE-OWNED LUXURY WATCHES SOLD 67% (+22%) PRODUCT SUPPLIERS OVER £500K SPEND IN FY26 REPORT HOLDING AT LEAST ONE SUSTAINABILITY STANDARD OR CERTIFICATION 34% (+18%) PRODUCT SUPPLIERS OVER £500K SPEND REPORT CARRYING OUT ETHICAL OR SOCIAL AUDITS OF THEIR SUPPLIERS 52% (+12%) PRODUCT SUPPLIERS OVER £100K REPORT HAVING A HUMAN RIGHTS POLICY 127 STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS --- NON-EXECUTIVE DIRECTOR APPOINTMENT # **NON-EXECUTIVE DIRECTOR APPOINTMENT** The timeline below sets out the key stages of the process that culminated in the Nomination Committee recommending the appointment of Paul Edgecliffe-Johnson to the Board. The selection process was undertaken in accordance with the Board's Diversity & Inclusion Policy, having regard to the skills and experience of existing Board members and the career paths candidates have followed, including sector and functional experience. | Timeline | Appointment process | | --- | --- | | Stage 1 | **Building the Brief** The Committee agreed the attributes and skills required. These focused on strong experience in relation to risk and audit, public limited companies, luxury, the US, the characteristics of a successful NED and the ability to build effective, trusting relationships with the other Directors. | | Stage 2 | **Candidate Search** The Committee appointed an executive search firm, The MBS Group (MBS), to assist with the appointment process. MBS is a leading B Corp-certified executive search and leadership advisory firm working across all consumer-facing industries. MBS provided a diverse list of candidates with interviews conducted initially by the Interim chair of the Audit & Risk Committee and Senior Independent Director and the Chair. A shortlist was then selected for interviews with Committee members, the CEO and CFO. The Committee confirms that the MBS Group has no connection to the Company and has not carried out any other work for the Company in the last two years. The MBS Group is a valued strategic partner to WiHTL & Diversity in Retail, the collaboration community founded by Tea Colaianni MBE, a Non-Executive Director of the Company, to advance inclusion across the hospitality, travel, leisure and retail sectors. | | Stage 3 | **Review, assessment and interviews** The shortlisted candidates were interviewed by a number of Committee members as well as the CEO and CFO, and a preferred candidate was selected. | | Stage 4 | **Recommendation** The Committee made its recommendation to the Board to appoint Paul Edgecliffe-Johnson. | | Stage 5 | **Induction** Induction programme was organised by the Company Secretary and General Counsel and Chair of the Board. | # **INDUCTION OF PAUL EDGECLIFFE-JOHNSON** Following appointment, Paul undertook a tailored and comprehensive induction and familiarisation of the business. The programme included meeting with Senior Management, colleagues, and a thorough handover from the Interim Chair of the Audit & Risk Committee. | Timeline | Induction Process | | --- | --- | | Meeting with key stakeholders within the business | – Comprehensive briefing with the Company Secretary and General Counsel on director duties, governance standards and regulatory responsibilities – Director of Internal Audit & Risk to review the current Internal Audit plan and ways of working – Members of the finance team to gain an understanding of the finance systems – Executive Directors, Trading Board and members of Senior Management teams in the US and UK | | Gaining an understanding of the business, including colleagues, product and brand partner relationships | – Visited the Support Centre in Leicester – Visited a number of showrooms – Informal interactions with colleagues | | Engaging with external advisors to gain industry insights into the business | – Briefing from corporate lawyers – Session with the corporate brokers – Session with the Company's Public Relations consultant – Sessions with the Company's External Auditor | | Understanding recent Board and Committee meetings considerations | – Being provided with access to minutes and matters arising from Board and Committee meetings – Reviewing the FY25 externally facilitated Board Performance Review and resulting action plan – Reviewing the FY26 Budget and presentations from the strategy session held in 2025 – Reviewing the Company's key policies and procedures | THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 174 --- # AUDIT & RISK COMMITTEE REPORT STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS ![img-40.jpeg](img-40.jpeg) MEMBERS Paul Edgecliffe-Johnson (Chair) Tea Colaianni MBE Baroness (Rosa) Monckton MBE Chabi Nouri KEY RESPONSIBILITIES Financial reporting: - Monitor the integrity of the Financial Statements of the Group and Company - Review the appropriateness and consistency of significant accounting policies - Review and report to the Board on significant financial issues and judgements - Review the appropriateness of Task Force on Climate-Related Financial Disclosures (TCFD) Internal control and risk management: - Carry out a robust assessment of the Group's emerging and principal risks on an annual basis, including environmental risks and opportunities - Review the Group's internal control and risk management systems - Monitor and review the effectiveness of the Group's Internal Audit function - Assess the effectiveness of whistleblowing arrangements External audit: - Review the effectiveness of the External Audit process - Develop and implement policies on the engagement of the External Auditor to supply non-audit services and consider the impact they have on independence - Review and monitor the External Auditor's independence and objectivity - Conduct any external audit tender process and make recommendations to the Board about the appointment, reappointment and removal of the External Auditor - Approve the remuneration and terms of engagement of the External Auditor - Ensure the External Auditor has full access to Group colleagues and records - Invite challenge by the External Auditor, giving due consideration to the points raised Other: - Engaging with shareholders on the scope of the external audit, where appropriate DEAR STAKEHOLDER I was appointed as Chair of the Committee in March 2026 and so this is my first report of the Committee as Committee Chair. Robert Moorhead stepped down from the Board and the Committee in November 2025 and I would like to extend my thanks to Tea Colaianni MBE for acting as Interim Chair of the Committee and her diligence in handing over to me. The Committee plays a key role in developing the Group's governance framework. Its activities included reviewing and monitoring the integrity of financial information, the Group's system of internal controls and risk management, Internal and External Audit processes and processes for compliance with laws, regulations and ethical codes of practice. In addition, we work with other Committees and the Board to ensure that stakeholder interests are protected and support the delivery of the Group's strategy. The Committee also worked alongside the ESG Committee having regard to ESG risk management and TCFD reporting. During the year, the Committee has had a significant focus on management's initiatives to define, structure and monitor material controls and supporting the Board's preparation to discharge future obligations under Provision 29 of the UK Corporate Governance Code 2024 (the 'Code'). Specifically, the Committee received regular updates on the internal control environment from the Director of Internal Audit and Risk as well as updates on work undertaken in relation to Provision 29. COMMITTEE COMPOSITION All members of the Committee are deemed Independent Non-Executive Directors. The Board considers that I have recent and relevant financial experience (as required by the Code) and the Committee has competence relevant to the sector in which the Group operates. As noted on page 158, there was a three-month period between November 2025 and February 2026 where the Committee membership did not include recent and relevant financial experience as required by the Code. This was resolved by my appointment and mitigated during the period through access to our independent Internal Audit team and other professional expertise as required. Details of the Audit & Risk Committee members' experience can be found on pages 156 and 157. The Committee's range of financial and commercial skills and experience serves to provide the necessary knowledge and ability to work as an effective committee and to robustly challenge the Executive Directors and members of Senior Management as and when appropriate. At the invitation of the Committee, the Chair of the Board, the CEO, the CFO, the Director of Internal Audit & Risk, Senior Management and the External Auditor attend meetings. The Committee has regular private meetings with the External Auditors and the Director of Internal Audit & Risk during the year. The Company Secretary and General Counsel acts as Secretary to the Committee. TERMS OF REFERENCE The Terms of Reference of the Committee reflect the current statutory requirements and best practice appropriate to the Group's size, nature and stage of development. The Committee met its requirement to meet at least four times a year. Details of meeting attendance can be found on page 153. The Committee reviews its Terms of Reference annually, recommending changes to the Board. Changes were made this year in response to requirements in relation to material controls under Provision 29 of the Code. These changes will ensure the Group remains aligned to the current Code guidance. COMMITTEE EFFECTIVENESS During FY26, an internal Board Performance Review was undertaken. The Report concluded that the Committees were thought to be operating effectively and are well chaired. Details of how the Board Performance Review was conducted can be found on page 171. 175 --- AUDIT & RISK COMMITTEE REPORT CONTINUED ACTIVITIES UNDERTAKEN BY THE AUDIT & RISK COMMITTEE Financial reporting: - Monitored the integrity of the Group's FY26 year end Results Announcement, Annual Report and Accounts, and the FY26 half year review - Assessed and recommended to the Board that the Annual Report and Accounts are fair, balanced and understandable, including Alternative Performance Measures (APMs) - Assessed the Going Concern and Viability Statement having reviewed supporting papers from management including the consideration of changing global trading conditions, inflationary impacts on the Group's cost base and climate change on those assessments - Considered papers from management on the key financial reporting judgements and estimates - Reviewed the TCFD FY26 year-end reporting, including the scenario analysis undertaken to assess the impact of climate-related risks Internal control and risk management: - Considered the adequacy and effectiveness of the Group's ongoing risk management systems and control processes, including environmental risks and opportunities - Considered the Group's risk environment, including its significant and emerging principal risks and uncertainties, and reviewed the mitigating actions that management has taken, along with determining the risk appetite of the business - Considered the organisational design, structure, resources and capabilities to manage risk with particular focus on legal, regulatory and cyber security risks - Reviewed the Group's approach to identification and assessment of its material controls over principal risks in response to reporting changes required under Provision 29 of the Code - Considered the results of a review of the Group's exposures to, and controls over, supplier income, US commercial and financial management structures and assurance activity - Received deep dive presentations on key risk areas including cyber security, data governance including the approval of a Data Protection and Information Security Statement, health and safety, business interruption insurance cover and insurance policy enhancements - Reviewed and approved the Group's Whistleblowing Policy and received and reviewed whistleblowing incidents, investigation details and follow-up actions - Considered updates in relation to anti-bribery and corruption and anti-money laundering programmes. The Committee recommended to the Board for approval the Anti-Bribery, Corruption & Fraud Policy which includes the gifts and hospitality protocols and the Anti-Money Laundering Policy - Considered the Group's systems and framework of controls designed to detect and report fraud including actions in response to the UK Economic Crime and Transparency Act including the Failure to Prevent Fraud Legislation - Approved the Group Tax Strategy, received management reports on the tax affairs of the Group and recommended to the Board for approval the Anti-Facilitation of Tax Evasion Policy (formerly Corporate Criminal Offence Policy) Internal and external audit: - Reviewed the effectiveness of the external audit process, taking into consideration relevant UK professional and regulatory requirements - Invited challenge by the External Auditor, giving due consideration to the accounting, financial control, and audit issues reported by the External Auditor as a result of their work - Reviewed the Internal and External Auditor independence and objectivity including approving the policy on non-audit services - Agreed the External Auditor engagement letter and recommended the External Auditor remuneration to the Board - Reviewed and approved the Internal Audit Charter - Received and reviewed the annual plan and audit reports from the Internal Audit function - Undertook a review of the effectiveness of the Internal Audit function - Held regular private meetings with the Internal and External Auditors, without management present - Ensured the External Auditor had full access to Company colleagues and records Making recommendations to the Board about the reappointment of the External Auditor: - Reported to the Board on how the Committee has discharged its responsibilities with respect to external audit Other: - Reviewed controls over the recognition of revenue from supplier income - Reviewed the Committee's Terms of Reference and approved amendments - Monitored mandatory e-learning completion statistics for key compliance areas such as Health & Safety, Anti-Bribery, Corruption & Fraud, and Code of Ethics - Received legal and regulatory compliance updates GOING CONCERN AND VIABILITY STATEMENT The Committee reviewed the process and assessment of the Group's prospects made by management, including: - The three-year viability assessment period and alignment with the Group's internal forecasts and business model - The assessment of the capacity of the Group to remain viable after consideration of future cash flows, financing and mitigating factors - The modelling of the financial impact of the Group's principal risks materialising using severe but plausible scenarios The Committee reviewed management's analysis supporting the going concern basis of preparation, including reviewing the Group's financial performance, FY27 forecasts and cash flow projections. The going concern and viability reviews by the Committee included review of the results of the reverse-stress tests performed by management, of available financing in place and of any further mitigating actions that management could take. In making its assessment, the Committee took into consideration the trading results of the Group, liquidity and covenant compliance. As a result of the assessment, the Committee reported to the Board that the going concern basis of preparation remained appropriate and that there is a reasonable expectation that the Group will be able to continue in operation to meet its liabilities as they fall due over the three-year viability assessment period. The Going Concern and Viability Statement is set out in the Strategic Report on pages 148 and 149. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 176 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS ## SIGNIFICANT FINANCIAL REPORTING AREAS In preparing the Financial Statements, there are several areas requiring the exercise of judgement by management. The Committee's role is to assess whether the judgements and estimates made by management are reasonable and appropriate. To assist in this evaluation, the CFO provided an accounting paper to the Committee, setting out all the financial reporting judgements and estimates which were considered material to the Financial Statements. The main areas of judgements and estimates that have been considered by the Committee in the preparation of the Financial Statements are as follows: ### Impairment of tangible and right-of-use assets The Committee received and considered a paper from management covering the judgements made in respect of the impairment testing of the Group's property, plant and equipment, and right-of-use assets. The Committee noted that management had considered the trading results of each showroom and noted where a showroom had low profitability which was not expected to improve in the near future. The Committee also reviewed management's assessment of whether any prior impairments should be reversed. Given management has continued to report on the performance of the business on a pre-IFRS 16 (IAS 17) basis within its APMs alongside statutory measures derived under IFRS 16, the paper and discussions considered impairment assessment of these assets on both bases. As part of their review of impairment, the Committee challenged the assumptions used in the cash flow forecasts for impairment testing, along with the disclosures made in the Financial Statements. The Committee also received and discussed a paper from the External Auditor on its work in this area, which specifically considered and reported on its challenge and assessment of the key assumptions and methodology used. The Committee was satisfied that the approach adopted by management was sufficiently robust to identify when an impairment charge or reversal for showroom assets needs to be recognised and how it should be assessed and reported. ### Inventory valuation The Committee received a paper from management on accounting for and valuation of inventory, including pre-owned inventory. It discussed the judgements made by management, with specific consideration to discontinued product and slow-moving stock. The Committee also considered the policy for, and calculation of, rebates recognised and absorbed into inventory. The Committee received a paper from the External Auditor regarding the audit work it performed over the valuation of inventory. The Committee is satisfied that the process and judgement adopted by management for the valuation of inventory is sufficiently robust to establish the value of inventory held and is satisfied as to the appropriateness of the Group's provisioning policy. ### Revenue recognition The Committee received papers from management covering the control environment relating to sales cut-off and accounting judgements in relation to the accounting for gift cards, client returns and client deposits. The Committee also received a paper from the External Auditor regarding the audit work they performed over revenue recognition, which included the use of data analytic tools. The Committee determined that the majority of the Group's revenue transactions are non-complex, with minimal judgement applied over the amount recorded. The Committee is satisfied that the approach taken by management is sufficiently robust in relation to the recognition of revenue. ## IFRS 16 'Leases' During the year, the Committee reviewed the key judgements and assumptions applied to the calculations and disclosures provided within the Financial Statements. The Committee considered and challenged the use of pre-IFRS 16 APMs within the Annual Report and Accounts and concluded that these APMs align with the management reporting used to inform business decisions, investment appraisals, incentive schemes and banking covenants. ### Exceptional items The Committee considered the presentation of the Financial Statements and in particular the use of APMs and the presentation of exceptional items in line with the Group accounting policy. This policy states that adjustments are only made to reported profit when not considered part of the normal operating costs of the business and considered exceptional due their size, nature or incidence. Each of the above areas of judgement has been identified as an area of focus and therefore the Committee has also reviewed reporting from the External Auditor on the relevant areas. ### Annual Report and Accounts – fair, balanced and understandable assessment The Committee has considered whether, in its opinion, the Annual Report and Accounts 2026, taken as a whole, are fair, balanced and understandable, and that they provide the information necessary for shareholders to assess the Group's position and performance, business model and strategy. The Group has established internal controls in relation to the process for preparing the Annual Report and Accounts. These include the following: - Management regularly monitors and considers developments in accounting regulations and best practice in financial reporting and, where appropriate, reflects developments in the Financial Statements - The Annual Report and Accounts are drafted by Senior Management with overall co-ordination by a member of the finance team, to ensure consistency across the relevant sections - An internal verification process is undertaken to ensure accuracy - Comprehensive reviews of drafts of the Annual Report and Accounts are undertaken by experienced members of Senior Leadership and members of the Committee - The final draft of the Annual Report and Accounts is reviewed by the Committee prior to consideration by the Board Following its review, the Committee advised the Board that the Annual Report and Accounts, taken as a whole, were considered to be fair, balanced and understandable and that they provided the information necessary for shareholders to assess the Group's position and performance, business model and strategy. The Committee was also satisfied that suitable accounting policies have been adopted and appropriate disclosures have been made in the Financial Statements. 177 --- AUDIT & RISK COMMITTEE REPORT CONTINUED RISK MANAGEMENT AND INTERNAL CONTROLS The Board has ultimate responsibility for effective management of risk for the Group including determining its risk appetite, identifying key strategic and emerging risks, and reviewing the risk management and internal control framework. The Committee, in supporting the Board to assess the effectiveness of risk management and internal control processes, relies on several different sources to carry out its work including Internal Audit assurance reports, and the assurance provided by the External Auditor and other third-parties in specific risk areas. The Committee monitors and reviews the effectiveness of the Group's risk management processes and internal financial and non-financial controls, including its material controls. The key features of risk management processes that were in place during the year are as follows: - Key business functions conducted risk assessments based on identified business objectives, which were reviewed and agreed annually by the Senior Management of each function. Risks are considered and evaluated in respect of their potential impact and likelihood. These risk assessments are updated and reviewed at least half-yearly and are reported to the Committee - A Group risk assessment is also undertaken by management, which considers all areas of potential risk across all systems, functions and key business processes. This risk assessment, together with the business risk assessments, forms the basis for determining priorities within the Internal Audit plan - Climate-related physical and transition risks and opportunities, which could impact the business in the future under different climate scenarios, have been considered and incorporated into the risk management framework with oversight from the ESG Committee - The Director of Internal Audit & Risk met with Senior Management to undertake a formal review of the internal controls across the Group. Senior executives were required to certify compliance with the Group's policies and procedures and that appropriate internal controls were in operation during the period under review. Any weaknesses were highlighted, and the results were reviewed by the Director of Internal Audit & Risk, the Committee, and the Board - The Committee confirmed to the Board that it has reviewed the effectiveness of the systems of internal control, including financial, operational and compliance controls, and risk management for the period of this report, in accordance with the Code and the Risk Management and Internal Control Guidance INTERNAL AUDIT The Director of Internal Audit & Risk, who reports directly to the Committee Chair, provides assurance to the Committee through independent reviews of agreed risk areas. The Committee is responsible for overseeing the work of the Internal Audit function. It reviews and approves the scope of the Internal Audit plan and assesses the quality of Internal Audit reports, along with management's actions relating to findings and the closure of recommended actions. Each year, a carefully targeted Internal Audit plan is agreed to provide appropriate assurance to the Committee over the effectiveness of risk management and internal control processes across the Group. The Internal Audit plan is risk-based and takes an independent view of what Internal Audit considers to be the highest known and emerging risks and strategic priorities facing the business. The Committee is satisfied that the Internal Audit plan provides appropriate assurance on the controls in place to manage the principal risks facing the Group. Internal Audit resources continue to be reviewed, with an agreement that external partners would be utilised where subject matter expertise would be most appropriate. The Director of Internal Audit & Risk: - Attended all Committee meetings and provided reports and verbal updates to the Committee - Had direct access to all Committee members and met with the Committee Chair and Committee members separately - Regularly met with the Committee Chairs to carry out formal reviews of the Internal Audit function's resources, approach and audit plan - Managed the risk register review process - Met privately with the Committee without management being present The assessment of the Internal Audit team covered the Internal Audit findings and reporting. Internal Audit delivery including the Internal Audit plan, and whether Internal Audit has sufficient, appropriate resources. In reviewing the effectiveness of Internal Audit, the Committee considered: - The results of Internal Audits and reporting thereof - Ongoing communication between the Director of Internal Audit & Risk and the Committee, including the private sessions held - Self-assessment by the Director of Internal Audit & Risk - Questionnaires and feedback from key stakeholders including Senior Management Following assessment by the Committee during the year, the Committee is satisfied that the Internal Audit team has the quality, experience and expertise appropriate for the business. EXTERNAL AUDITOR Interaction with external audit One of the Committee's roles is to oversee the relationship with the External Auditor, Ernst & Young LLP (EY), and to evaluate the effectiveness of the service provided and their ongoing independence. The External Auditor has attended all this year's Committee meetings and at two of those had time with the Committee without management present. The Chairs of the Committee have also met with the external audit partner to review the audit scope and audit findings. The Committee had regular open communication with the External Auditor as well as with the Group's management. External Auditor independence and objectivity During the year, the External Auditor reported to the Committee on its independence from the Group. The External Auditor's independence and objectivity are safeguarded by: - A policy being in place which limits the nature of non-audit services - The External Auditor's own internal processes to approve requests for non-audit work to the External Auditor - Monitoring changes in legislation related to auditor independence and objectivity - Rotation of the lead audit partner after five years - Independent reporting lines from the External Auditor to the Committee - Restrictions on the employment by the Group of employees of the External Auditor The Committee and the Board are satisfied that EY has adequate policies and safeguards in place to ensure that the External Auditor's objectivity and independence are maintained. When assessing the independence of the External Auditor, the Committee considers, amongst other things, the length of tenure of the audit firm and the audit partner, the value of non-audit fees provided by the External Auditor and the relationship with the External Auditor as a whole. As part of the assessment of the External Auditor, the Committee considered whether the External Auditor had exercised professional scepticism and an appropriate degree of challenge to management. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 178 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS ### Non-audit services provided by the External Auditor The Committee has adopted a formal policy in respect of non-audit services provided by the External Auditor to ensure that Auditor objectivity and independence are appropriately maintained. | Non-audit services | Policy | | --- | --- | | **Audit-related services** Audit-related services are services, generally of an assurance nature, provided by the Auditor as a result of its expert knowledge and experience of the Group. Audit-related services include: – Reviews of half-year results – Reporting required by law or regulation to be provided by the Auditor – Reports to regulators – Permissible non-audit services including, but not limited to: – Work related to mergers, acquisitions, disposals or circulars – Benchmarking services – Corporate governance advice | The Auditor is eligible for selection to provide non-audit services to the extent that its skills and experience make it a competitive and most appropriate supplier of these services. Each new non-audit service must be approved by the Committee in advance of the services being commenced. Non-audit fees are capped to a maximum aggregate in any financial year of 70% of the average of the statutory audit fees charged in the previous three consecutive financial years. In the case of this cap, audit-related services concerning work required by national legislation are excluded. | | **Prohibited services** In line with the FRC's Ethical Standards, services where the Auditor's objectivity and independence may be compromised by the threat of self-interest, self-review, management, advocacy, familiarity or intimidation are prohibited. Prohibited services include: – Tax services – Services that involve playing any part in the management decision-making process – Bookkeeping and preparing accounting records and financial statements – Payroll services – Designing or implementing internal controls – Valuation services (except such services that have no direct effect or are immaterial to the financial statements) – Legal, internal or human resources services – Services linked to financing, capital structure and allocation and investment strategy except providing assurance services in relation to the Financial Statements, such as the issuing of comfort letters in connection with prospectuses issued by the audited entity – Promoting, dealing in or underwriting shares in the Company | The Auditor is prohibited from performing these services for the Group or any of its subsidiaries. | Non-audit services provided by EY during the financial year ending 3 May 2026 were limited to the half year review. The fee in relation to this service was £85,100 (FY25: £73,100). ### Competition and Market Authority (CMA) Order 2014 Statement of Compliance EY was first appointed in 2019 following a competitive tender process. This means that FY26 represents EY's seventh year as the Company's External Auditor. Under UK law, as set out in the Companies Act 2006, the Company may retain its External Auditor for up to 20 years with a public tender process every ten years. The Group confirms that it was in compliance with the provisions of the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014 during the financial year ended 3 May 2026. 179 --- AUDIT & RISK COMMITTEE REPORT CONTINUED EXTERNAL AUDITOR EFFECTIVENESS It is the Committee's responsibility to assess the effectiveness of the external audit, including audit quality. The Committee assessed the External Auditor's effectiveness in September 2025 and kept this under review throughout the year taking into account the External Auditor's mindset and culture; skills, character and knowledge; quality control and judgement. The assessment included: Reviewing the Auditor's risk assessment and audit plan The Committee discussed EY's risk assessment and detailed audit plan in response to those risks. The proposed approach and planned scope of the audit were also reviewed including the proposed materiality. The Committee was satisfied that the audit plan was robust and covered the financial reporting risks. The Committee also considered the balance of work completed between the US and UK components along with recent acquisitions. Proposed level of audit fees The Committee reviewed and approved the proposed audit fees, which included a detailed breakdown of those fees. This review also considered the level of resources, senior leadership involvement and the use of specialist teams where appropriate. The Committee satisfied itself that the agreed amount represented fair value in order to deliver the quality and scale of audit sought. Evaluation of the FRC's Audit Quality Inspection and Supervision Report on Ernst & Young LLP The Committee reviewed the FRC's Audit Quality Inspection and Supervision Report for Ernst & Young LLP and also compared the results of the Auditor to other audit firms. EY presented to the Committee its feedback on the findings and planned actions to respond to each of those findings. The Committee was satisfied with the outcome of this review. The Committee also considered how the External Auditor had responded to its previous assessments of audit quality. Feedback from management and the Committee members The Committee considers it important to gather feedback from management, particularly those who are in direct contact with the audit team. Management and Committee members completed a questionnaire and the results were reviewed by the Committee. The questions covered the following areas: - Mindset and culture - Skills, character and knowledge - Quality control - Judgement The feedback received was positive in all areas. Each year the External Auditor meets with management to review the audit process, obtain feedback and make recommendations for improvement in the following year's audit. Interaction with the External Auditor Throughout the year, the Committee worked closely with EY and was able to gather a good insight into the overall quality of the audit process and the performance of key individuals within the audit team. This interaction included private sessions with the External Auditor without management present and regular meetings between the Committee Chairs and the Audit Partner. The Committee also considered the quality of the reporting provided by the External Auditor throughout the audit process. This included the robustness and perceptiveness of the Auditor in handling key judgements, responding to questions from the Committee and in its commentary where appropriate on the systems of internal control. The Committee considered the External Auditor's use of professional scepticism throughout the audit by examining areas in which the External Auditor had challenged Senior Management's assumptions. This was particularly in relation to the key areas of judgement around the significant financial reporting areas, and the number and nature of accounting and control observations raised. Based on these reviews, the Committee concluded that EY had applied appropriately robust challenge and scepticism throughout the audit, that it possessed the skills and experience required to fulfil its duties effectively and efficiently, and that the audit was effective. Auditor reappointment The Committee is responsible for considering whether there should be a rotation of the External Auditor in order to ensure continuing auditor quality and independence, including consideration of the advisability and potential impact of conducting a tender process for the appointment of a different External Auditor. The Committee is also responsible for recommending to the Board whether it should ask the shareholders to appoint, reappoint or remove the External Auditor at the AGM. In its oversight of the external audit, the Committee reviewed the requirement to put the external audit contract out to tender at least every ten years. The Committee considered whether it would be appropriate to conduct an audit tender at this time. The Committee took into account: - Its continued satisfaction with the quality and independence of the External Auditor's audit - Any new External Auditor would need a transition period to develop sufficient understanding of the business given the Company's size and complexity - Frequent changes of External Auditor would be inefficient and could lead to increased risk and the loss of cumulative knowledge - A change in auditor would be expected to have a significant impact on the Company, including on the Company's finance function - Any change in auditor should be scheduled to limit operational disruption After due consideration the Committee determined it would not be appropriate to re-tender for the external audit before a tender process is required in 2029. EY has expressed willingness to continue in its capacity as independent Auditor of the Company. The Committee has recommended to the Board the reappointment of the External Auditor for the 2027 financial year and the Directors will be proposing the reappointment of EY at the forthcoming AGM. The External Auditor is required to rotate the audit engagement partner every five years. The current engagement partner, Helen McLeod-Jones, was appointed with effect from FY25. FRC's Audit Committees and the External Audit: Minimum Standard The Committee confirms its compliance with the FRC's Audit Committees and the External Audit: Minimum Standard, including requirements on membership, independence and financial competence, including the review of External Audit effectiveness. Members maintain their sector relevant expertise through formal training, external briefings and regular updates on emerging accounting, audit and regulatory developments. PAUL EDGECLIFFE-JOHNSON CHAIR OF THE AUDIT & RISK COMMITTEE 13 July 2026 THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 180 --- # ESG COMMITTEE REPORT STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS ![img-41.jpeg](img-41.jpeg) MEMBERS Baroness (Rosa) Monckton MBE (Chair) Tea Colaianni MBE Ian Carter Brian Duffy Paul Edgecliffe-Johnson Chabi Nouri KEY RESPONSIBILITIES - Provide oversight on behalf of the Board in relation to the Company's ESG Strategy including activities and performance - Oversee ESG and sustainability goals, targets and KPIs, and provide accountability for successful delivery - Monitor the progress of the Company's ESG Strategy and climate transition planning to ensure it is embedded into core business operations, and that stakeholders are engaged with it - Ensure the Company monitors current and emerging ESG trends and adheres to relevant international standards and legal/regulatory/governance requirements - Provide guidance and monitor actions and initiatives taken to prevent, mitigate and manage risks related to ESG matters which may have a materially adverse impact on the Company and its stakeholders - Collaborate with the Audit & Risk Committee and the Remuneration Committee on matters which overlap - Make recommendations to the Board in relation to the required resourcing and funding of ESG-related activity - Oversee the Company's public disclosures, regarding the Company's ESG Strategy activities and performance, and review and monitor the Company's non-financial reporting with respect to ESG matters DEAR STAKEHOLDER It is my pleasure to present the ESG Committee Report for the period ended 3 May 2026. During the period, the Committee has continued to provide oversight of ESG activities ensuring the Group is able to demonstrate its commitment towards delivering its ESG Strategy. The Committee receives regular updates on current trends and developments within the ESG regulatory landscape whilst recognising there is a shift in stakeholder sentiment and scrutiny towards the ESG agenda in general, with ESG considerations being embedded within ordinary business operations. It is acknowledged that individual elements of the ESG framework remain important indicators of a responsible and ethical business and the Group continues to operate in line with its value to 'do the right thing, always' and integrate ESG best practices within its day-to-day business operation with the aim of supporting the long-term sustainability of the business. The Committee remains cognisant of the continually evolving ESG landscape and monitors these issues alongside increasing reporting regulations. The Committee supports the Group in making progress across environmental, social and governance indicators and strategic sustainability initiatives; strengthening compliance, mitigating against risk and leveraging related opportunities. This progress is reflected in our strong rating agency scores, demonstrated by our improved A-score for our response to the 2025 CDP questionnaire on climate change, being named a 2026 ESG Industry Leader by a leading global ratings provider, and for advocating for our industry with representation on the Responsible Jewellery Council (RJC) Standards Committee. MEMBERS I am joined on the ESG Committee by Ian Carter, Chair of the Board, and Non-Executive Directors Tea Colaianni MBE, Paul Edgecliffe-Johnson and Chabi Nouri. Brian Duffy, the Company's CEO, is also a member of the Committee and plays an instrumental role in integrating ESG matters into the Company's business strategy and planning, demonstrating top level commitment from Senior Leaders in progressing the ESG Strategy. Biographies of Committee members, including details of their skills and experience, can be found on pages 156 and 157. The Company Secretary and General Counsel acts as Secretary to the ESG Committee and other Senior Management and/or external advisers may attend by invitation, as appropriate, for all or part of meetings. This includes the CFO, the Head of Sustainability and ESG, the Executive Director, Global Buying and Merchandising and the Executive Director HR. ROLE In FY26, the Committee continued to oversee progress against material ESG indicators including challenging and collaborating with the Executive Directors and Senior Leaders, to ensure ESG is integrated in the Group's day-to-day business operations as well as the long-term strategy. Our ESG Strategy and approach are aligned with best practice frameworks and the expectations of our stakeholders and aims to be both inspiring and achievable. Our Strategy focuses on delivering against identified priorities and is organised into three Sustainability strategic pillars: People; Planet; and Product, to align with the Group's purpose and values, support engagement and integrate with wider business strategies. 181 --- ESG COMMITTEE REPORT CONTINUED The Committee closely monitors progress against ESG metrics and targets including the key performance indicators within the Modern Slavery Statement. Alongside the Remuneration Committee, the Committee also considers the key areas of strategy which link to the ESG bonus underpin for determining bonus outcomes. Further details on the ESG underpin and its performance can be found in the Directors' Remuneration Report on page 184. The Committee supports the Audit & Risk Committee and the Remuneration Committee in respect of ESG-related matters reserved for their remit. The Committee also plays a crucial role in monitoring environmental goals including the development and delivery of a climate transition plan, and ensuring actions are taken to mitigate and manage climate-related risks and opportunities, making sure they are embedded in the Group's risk management processes, financial decision-making and core business strategy. The ESG Committee is supported by an ESG Steering Group, which is chaired by the CFO. The ESG Steering Group is made up of key Senior Leaders, who each have formal operational responsibility for the management of relevant ESG issues. The ESG Steering Group acts under a separate Terms of Reference and reports progress towards the development, implementation and delivery of the Company's ESG Strategy into the ESG Committee. The ESG Steering Group is supported by a number of working groups which sit under the People, Planet and Product sustainability pillars. #### People Colleagues can share their thoughts through a variety of channels, including Skip-level meetings, engagement surveys, or CONNECT – the interactive digital Group engagement platform, which is used to promote and communicate the colleague incentive, and GreenVibE, which encourages and rewards positive environmental behaviours. Further information on this part of the Company's colleague engagement programme can be found on pages 91 to 94. The Group takes great pride in the expertise and dedication of our hard-working colleagues, who share in our purpose and values and has built strong talent and development foundations. The Committee was pleased to note that our gender pay gap continues to narrow, underpinning our commitment to a culture of meritocracy. This year, the mean gender pay gap reduced from 16% in 2024 to 15% in 2025. Whilst there is still a way to go, we are encouraged by this progress and expect it to continue as the Group continues to grow. It is important to note that at Company level, the upper quartile is the only quartile where we see a more significant gender pay gap. Across the remaining 75% of our total population, the median and mean pay gap narrows and becomes 0% in the lowest quartile. When we look in closer detail across our Retail divisions, we continue to report overall progress in closing the gender pay gap in our UK Retail businesses. For further information, please see page 187. #### Planet – Climate transition plan As required by UK law the Group is aiming for net-zero carbon emissions by 2050 and the Committee is mindful that failure to align risks regulatory scrutiny, and that policy changes may affect future operations and costs. During the year, the Committee approved the Company's long-term science-based targets. The Committee also agreed with the disaggregation of our Scope 1 and 2 targets in line with best practice and in January 2026, the SBTi verified and approved the targets. Further information on these targets can be found on page 101. #### Planet – Energy management The Group is committed to responsible energy management and continual improvement in energy and as such the Committee approved an Energy Policy which outlines our guidelines and procedures for reducing energy consumption, improving energy efficiency, and minimising our environmental impact performance across every territory we operate in. The Company's Property Team has day-to-day responsibility for the implementation of this Policy and will monitor it accordingly to ensure it is being adhered to. The Group further rolled out a new technological solution to reduce energy consumption and related carbon emissions and as such the Committee noted the cost of capital expenditure required to roll out this project. The Committee was supportive of the project as it would support the Group's net-zero strategy and is estimated to deliver energy savings over a three-year period across the Group's showroom portfolio. #### Planet – Emissions Our total emissions grew 14% year-on-year, reflecting record growth and the high concentration of emissions within 'Purchased Goods and Services', which accounts for approximately 86% of our Group carbon footprint. A 19% increase in spend-based emissions factors also contributed to this increase – and underlined the need for greater visibility of our value chain, more targeted supplier engagement and the introduction of emissions estimation methodologies in FY27 where data is unobtainable. While this increase in total emissions is disappointing, we were glad to see a 2% reduction in combined Scope 1 and 2 emissions as we continue to improve operating efficiency and build climate resilience. #### Product – Supply chain due diligence The Procurement Policy, Sustainability Standards and the Vendor Code of Conduct operate simultaneously and compliance is supported by the factory audit programme, which independently audits suppliers on a rotational basis. The Committee receives updates on the audit programme at each meeting. On-site factory audits help safeguard the integrity and reputation of our business operations and partnerships, with specialist independent auditors assessing facilities against over 200 indicators. In June 2025, management attended the JCK Jewellery exhibition at Las Vegas, where a number of meetings had been held with jewellery suppliers and the opportunity was taken to reinforce the messaging on the importance of supplier audits. With the introduction of lab-grown diamonds which are becoming an increasing part of the Company's portfolio of products, the Committee discussed due diligence pertaining to the supply of lab-grown diamonds. Relevant suppliers are subject to online screening as part of our onboarding and supply chain management process and are included in the current internal audit schedule. In addition, the latest RJC guidance on lab-grown diamonds has been incorporated into the Group's Supplier Operating Manual. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 182 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS #### KEY FOCUS AND ACTIVITIES DURING THE YEAR - – Approved the Annual Report and Accounts 2025 ESG Committee Report - – Climate transition plan – reviewed the updated net-zero roadmap, including interim targets and capital allocation implications - – Contributed to the development and delivery of the ESG Strategy and reporting, by approving key decisions and providing accountability against goals, targets and KPIs - – Received reports and recommendations from the ESG Steering Group - – Supply chain due diligence – evaluated human rights risk assessments and modern slavery controls - – Governance – reviewed key documents for Board approval including: the Modern Slavery Statement; the Environmental Policy; the Human Rights Policy - – Recommended appropriate sustainability and ESG-related performance objectives for Executive Directors, as part of the ESG bonus underpin, to the Remuneration Committee - – Benchmarked the Company's performance against sustainability rating agency reports along with the CDP questionnaire on climate change - – In conjunction with the Audit & Risk Committee, reviewed the Company's progress against recommendations by the TCFD and non-financial reporting - – Carried out a review of the materiality assessment The Committee's duties and responsibilities are set out in its Terms of Reference, which are reviewed annually. These are available on the corporate website. Further details on our approach to managing our environmental performance can be found on pages 120 and 122. #### STAKEHOLDER ENGAGEMENT The Committee welcomes feedback from all our stakeholders to ensure their interests are represented in the ongoing development of the Company's ESG Strategy and approach to ESG matters. The Company responds to sustainability rating agency questionnaires received on behalf of investors and facilitates meetings and roadshows to enable investors to ask questions. The Head of Sustainability and ESG regularly updates the Committee with key external drivers and stakeholder sentiment, and it is also kept up-to-date with supplier engagement activities to support the promotion of shared sustainability goals and ensure due diligence. A materiality assessment, which is an important way of engaging with all stakeholder groups to identify issues impacting on our business, was reviewed with updates considered and approved. Issues identified as 'material' through this process were assessed. #### OUTLOOK To drive continual improvement, the Committee stays up-to-date with best practice and, during each meeting, the Company's performance is benchmarked against retail peers and leaders in luxury discretionary goods. We will continue to monitor the Company's performance and review our approach to ESG matters in FY27 to further enhance the Company's brands, create new business opportunities, help reduce costs, engage stakeholders and ultimately build a successful business that is sustainable over the long term. This monitoring will take place alongside external factors assessing the future of the ESG agenda as we continue to embed 'do the right thing, always' into our business as usual practices and processes under the banner of delivering on our Purpose. Further information on the work of the Committee and the progress being made by the Group can be found on pages 81 and 137. #### BARONESS (ROSA) MONCKTON MBE CHAIR OF THE ESG COMMITTEE 13 July 2026 103 --- # REMUNERATION COMMITTEE REPORT ![img-42.jpeg](img-42.jpeg) | Members | Independent | No. of meetings attended | | --- | --- | --- | | Tea Colaianni MBE (Chair) | ✓ | 3/3 | | Ian Carter | ✓ | 3/3 | | Baroness (Rosa) Monckton MBE | ✓ | 3/3 | | Paul Edgecliffe-Johnson | ✓ | 1/1 | | Robert Moorhead | ✓ | 1/1 | | Section | Page | | --- | --- | | Chair's statement | 184 | | Wider workforce considerations | 187 | | At a glance | 189 | | Annual Report on Remuneration | 192 | ## DEAR STAKEHOLDER On behalf of the Remuneration Committee, I am pleased to present the Group's Remuneration Committee Report for the 53-week period ended 3 May 2026. ### FY26 business performance highlights FY26 was a year of strong strategic and operational progress for the Group, which delivered ahead of expectations. - Revenue increased by 11% to £1,827.9 million - Adjusted EBIT¹ increased 3% to £154.8 million - Operating profit increased 49% to £170.0 million - Return on Capital Employed¹ (ROCE) reduced by 100bps to 18.0% We remain confident that our strategy, exceptional client experience and strong brand relationships will enable us to continue to drive growth. I would like to thank all colleagues for their continued work and dedication during the year. ### Base salary/fee increases in FY26 The annual salary review process took place in November 2025, in line with our normal review timing. The UK salary review saw an increase of 2% for our colleagues in the Support Centre and retail. The salary review in the US saw an increase of 3% for both Support Centre and retail colleagues. The CEO and CFO elected once again, not to receive an increase in base salary. In light of the uncertain macroeconomic conditions particularly the introduction of additional US tariffs and the ongoing government negotiation, the decision on any increase to the Chair and Non-Executive Director fees was deferred to September 2025. A comprehensive benchmarking exercise was carried out by Deloitte and an increase of 10% for the Chair and 3% for the Non-Executive Directors was approved by the Board effective from May 2025. This is the first increase since their appointment. ### Annual bonus outturn for FY26 The Executive performance target for the FY26 annual bonus was based on Adjusted EBIT, with an ESG underpin. Adjusted EBIT for FY26 was £154.8 million, which exceeded the maximum performance level for the FY26 bonus payment. The Remuneration Committee assessed progress against our ESG Strategy using the ESG bonus underpin agreed at the start of the financial year. The key highlights included: - **Caring for our Planet** – We have reduced our combined Scope 1 and 2 location-based emissions year-on-year and grew our sales of pre-owned watches - **Caring for our Colleagues** – We have maintained strong engagement with our colleagues and have delivered training and development programmes including apprenticeships - **Caring for our Communities** – We have continued our support of charitable organisations including The Watches of Switzerland Group Foundation and increased volunteering hours by 52% Overall, the Committee considered that the progress against our ESG Strategy in FY26 was positive. The Committee therefore determined that the ESG underpin has been met and that there would be no downwards adjustment to the formulaic bonus outcome. Full details on the performance outturn against the targets are shown in the 'At a glance' section on pages 189 and 190. The Remuneration Committee's Terms of Reference at: thewosgroupplc.com 184 THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS ### Long-Term Incentive Plan (LTIP) awards vesting in FY26 The performance conditions for the LTIP grants awarded in December 2023 were based 80% on three-year cumulative Adjusted EPS¹ and 20% on three-year average ROCE performance. The performance targets were set taking into account internal and external expectations of performance at the time. Despite strong performance over the last 12 months, the macroeconomic backdrop over the full three-year performance period resulted in cumulative Adjusted EPS of 124.8p and three-year average ROCE of 18.8%, which were both below the threshold target set. As such, 0% of the LTIP award is due to vest in July 2026. Vesting of LTIP awards granted in 2024 and 2025 will be based on performance for FY27 and FY28. The targets for the FY26 LTIP had not been finalised by the publication of last year's report due to market volatility, including the impact of US tariffs, delaying the target setting process. The targets for these awards were set during the year and were disclosed on our website at the time. These have been included on page 193. ### DIRECTORS' REMUNERATION POLICY Our Remuneration Policy was last approved by shareholders at the 2025 AGM where it received strong support (96.9%). Details on this policy can be found in the Annual Report and Accounts 2025. ### FY27 IMPLEMENTATION OF REMUNERATION POLICY #### Base salary/fee increases for FY27 The next salary reviews for all colleagues in the US and UK will be in November 2026. #### Annual bonus for FY27 The annual bonus will be determined in line with the normal cycle. For FY27, the annual bonus will continue to be based on Adjusted EBIT and the ESG underpin will continue to apply for FY27. The ESG underpin will focus on key metrics under our three main Sustainability pillars: - Caring for our Planet - Caring for our Colleagues - Caring for our Communities This ESG underpin will inform the Committee's decision of whether or not to apply a downwards adjustment of up to 10% to the formulaic FY27 annual bonus outcome. Key factors considered by the Committee will be disclosed retrospectively in next year's Annual Report and Accounts, in line with best practice. #### LTIP awards to be granted in FY27 The Committee has determined that LTIP grants will be made in line with the normal cycle of being awarded following the announcement of the FY26 results. No changes are proposed to the LTIP award levels and these will continue to be 200% of base salary for the CEO and 175% of base salary for the CFO. In line with last year's grant, the LTIP measures will be based on a three-year cumulative Adjusted EPS and three-year average ROCE with weightings of 80% and 20% of maximum respectively. ROCE is a key performance indicator (KPI) and measures the efficiency with which the Group is able to utilise its capital. Strong average ROCE performance combined with continued growth in earnings is critical in ensuring the successful execution of our long-term strategy and growth ambitions. ### Wider workforce considerations The Watches of Switzerland Group always strives to be an organisation that is inclusive, rewarding and fair to all colleagues. It is the unwavering commitment from our colleagues that has been critical to the Group as we navigated the trading conditions across luxury retail. During this time, the Committee has been acutely aware of the challenges our colleagues have been facing because of the macroeconomic environment. The Watches of Switzerland Group continues to be an organisation that values all colleagues across the business and is particularly mindful of the circumstances of those on the lowest salaries. Our commitment to the Real Living Wage Foundation in the UK over the past two years has meant that we have invested in those on the lowest wages. It was agreed to not meet the increase of 6% this year (recommended by the Real Living Wage Foundation) in the context of higher regulatory and labour costs in the UK. We have continued to embed our communication strategy in FY26 which creates a further opportunity for two-way communication across the Group. New Skip-level meetings and UK Town Halls have been attended by Baroness (Rosa) Monckton MBE in her capacity as the Designated Non-Executive Director for Workforce Engagement, which include question and answer sessions and the review of colleague feedback. In the US, we have focused on integrating colleagues from Roberto Coin Inc. into the US benefit plans and renewed private health insurance cover for all US colleagues. In the UK, we continue to provide the Watches of Switzerland Group Support Fund, which offers financial support by way of a loan for those most impacted by the cost-of-living crisis. We will continue to monitor this area and make adjustments as necessary to support ongoing retention and motivation in a challenging macroeconomic and talent environment. ### HOW THE REMUNERATION COMMITTEE SPENT ITS TIME IN FY26 As a Remuneration Committee, it is our responsibility to make decisions which support the Group's long-term business strategy, and which align with the Group's culture and values. We must balance this with our desire to reflect best practice remuneration and high standards of corporate governance. In addition to its usual activities, key areas of focus for the Committee in FY26 have been: - Ensured that our incentive framework continues to appropriately motivate and retain our colleagues in challenging market circumstances - Reviewed performance against incentive performance measures, including reviewing the ESG underpin - Considered and approved the remuneration package for colleagues below Board and new hires where appropriate - Reviewed gender pay gap progress and relevant actions - Reviewed Chair fee ¹ This is an Alternative Performance Measure. Refer to Glossary on pages 261 to 265 for definitions and reconciliation to statutory measures. 185 --- # REMUNERATION COMMITTEE REPORT ### Engagement with shareholders I would like to take this opportunity to thank our shareholders for their support of our Directors' Remuneration Report and Remuneration Policy at our 2025 AGM, details of which can be found on page 197. We recognise that executive remuneration is an area of public interest and we have worked hard to ensure that full transparency has been provided in this year's Directors' Remuneration Report on the Group's remuneration practices and our Remuneration Policy. ### In conclusion In addition to the policy, the remainder of the Remuneration Report is split into three parts: #### Wider workforce considerations This section contains discussions on the Company's initiatives in colleague and stakeholder engagement. In addition, we have included a report on specific areas in relation to wider workforce remuneration which the Committee reviewed during the course of the year. #### 'At a glance' section The 'At a glance' section provides a summary of the payments made to the Executive Directors during FY26. #### Annual Report on Remuneration This section summarises remuneration decisions during the past year. This includes details of annual bonus and long-term incentive awards granted and vesting during the year. I hope that you will find this year's report clear, transparent and informative. If you wish to discuss any aspect of this Remuneration Report, I would be happy to hear from you. You can contact me through our Company Secretary and General Counsel, Laura Battley. I will also be available at the Company's AGM at 2.30pm on Thursday 3 September 2026 to answer any questions. On behalf of the Remuneration Committee and the Board. **TEA COLAIANNI MBE** **CHAIR OF THE REMUNERATION COMMITTEE** 13 July 2026 THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 186 --- # WIDER WORKFORCE CONSIDERATIONS As part of our commitment to fairness, openness and inclusivity, as in previous years, we have included this dedicated section to provide more information on our communication with colleagues, our remuneration principles and wider workforce pay conditions. ## COMMUNICATIONS WITH COLLEAGUES We have a number of channels where colleagues' views on remuneration can be captured. For example, colleagues are able to express their views through Company Colleague Engagement Surveys and through two-way communication channels in the US and the UK. We are committed to giving our colleagues a voice and they have always had the opportunity to interact with our Directors. We have a dedicated Designated Non-Executive Director for Workforce Engagement, Baroness (Rosa) Monckton MBE, responsible for gathering our colleagues' views and presenting these to the Board. ### How we engaged with colleagues in FY26 - Open conversation during 'In Conversation With' sessions attended by Baroness (Rosa) Monckton MBE and senior leadership - Local 'pulse' surveys and understanding what matters to our colleagues - Innovative and accessible communication portals including CONNECT - Colleague engagement, input to office environment and the Foundation Forum - Visits to showrooms and other locations by the Chair of the Board and other Board members - Colleague attendance at Board meetings and informal engagement events with the Board In early April 2026, we hosted skip-level meetings chaired by Baroness (Rosa) Monckton MBE in the US and the UK which involved open two-way conversations with colleagues below management level. This provided Rosa with an opportunity to ask questions in an informal setting about culture, organisation and any other issues. ## REMUNERATION COMMITTEE REPORT A process was introduced in 2020, which enables the Remuneration Committee to carry out its oversight and review of wider workforce pay and policies, and to ensure that they are designed to support the Company's desired culture and values. When conducting its annual review, the Remuneration Committee pays particular attention to: - Whether remuneration is consistent with the Company's remuneration principles - If there are differences, whether they are objectively justifiable - Whether the approach seems fair and equitable in the context of other employees Once the Remuneration Committee has conducted its review of the wider workforce remuneration and incentives, it will consider the approach applied to the remuneration of the Executive Directors and Senior Management. In particular, the Remuneration Committee is focused on whether the approach to the remuneration of the Executive Directors and Senior Management is consistent with that applied to the wider workforce. The Remuneration Committee remains satisfied that the approach to remuneration across the Group is consistent with the Company's principles of remuneration. Furthermore, in the Remuneration Committee's opinion, the approach to executive remuneration aligns with the wider Company pay policy and there are no anomalies specific to the Executive Directors, excluding the fact that, since the IPO in 2019, the Executive Directors have elected not to receive salary increases or pensions. Both Executive Directors receive private healthcare insurance. ## GENDER PAY UK legislation requires employers with more than 250 employees to disclose information on their gender pay gap on an annual basis. We have published our eighth disclosure of the pay gap based on amounts paid in the April 2025 payroll. The bonus gap was based on incentives paid in the year to 31 March 2025. The mean gender pay gap at the Group has reduced to 15% from 16% last year. The median gap remains at 5% in line with last year. Whilst there is still a way to go, we are encouraged by the result. The full report, including details on the initiatives we have underway to help close our gender pay gap, is available on our website thewosgroupplc.com The following table sets out a summary of the information received by the Remuneration Committee on the Group's remuneration structure: | Element of remuneration | Overview of practice at the Watches of Switzerland Group PLC | | --- | --- | | **Alignment with remuneration principles** | The Group's remuneration principles are designed to enable fair and flexible reward structures to be developed and implemented across the entire organisation. We continue to review and redesign our policies in line with this principle. | | **Salary** | Salaries are set to reflect the market value of the role, and to aid recruitment and retention. Remuneration for all colleagues is in line with or above the UK National Living Wage or the US state minimum. We closely monitor the rates of pay of people who are training with us to make sure they remain fair and competitive. Salary increases are normally awarded annually following the Company's main pay review and are typically between 2% and 3%. This year, our UK Support Centre pay review delivered an increase of 2% for all colleagues below Executive Level. Typically, the Executive Directors will receive no more than the same percentage increase as the wider workforce. The US awarded pay increases of 3% to support and retail colleagues. From time to time, ad hoc pay reviews are conducted in order to make market or inflationary adjustments and ensure the Company's targeted living wage differential is maintained. | 187 STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS --- # WIDER WORKFORCE CONSIDERATIONS CONTINUED | Element of remuneration | Overview of practice at the Watches of Switzerland Group PLC | | --- | --- | | **Annual variable pay** | All Watches of Switzerland Group colleagues are entitled to earn variable pay linked to stretching performance targets: **Annual bonus plan** Subject to service and eligibility, our colleagues in support functions participate in the Company's annual bonus plan and are rewarded based on financial performance measured using Adjusted EBIT. As outlined in last year's Directors' Remuneration Report, a robust ESG underpin applies to annual bonus awards. Bonuses typically operate in one of three formats depending on the level of seniority and line-of-sight to performance: – For roles with a global remit, bonuses are based 100% on Group performance – For roles that wholly or mainly concentrate on either our US or UK operations, bonuses are based 100% on the performance of the business in the relevant country The bonus quantum for all colleagues is paid in full. Where Executive Directors have met their shareholding requirements in full, annual bonus awards will typically be made fully in cash rather than part being deferred into shares. Where an Executive Director has not met their shareholding guidelines, they would be required to defer one-third of their annual bonus into shares to support building their shareholding and to increase alignment with shareholder interests. Bonuses are normally paid in July, after it has been confirmed that the performance conditions have been met. **Sales commission plans** A range of plans exist for our retail team members which reflect the size and complexity of the showrooms. Targets can be based on individual objectives for larger showrooms or team-based objectives for smaller showrooms. The majority of these plans are paid monthly and biannually. We review these schemes periodically to ensure they adhere to our reward principles and support good client outcomes. | | **LTIP** | The LTIP is currently available to Executive Directors and Senior Management. LTIP awards are normally granted annually. Malus and clawback provisions are in place. The vesting period is normally three years. The Executive Directors are subject to an additional two-year holding period. Eligible colleagues and details of the award opportunity are set out below. | | **Level** | **No. of eligible colleagues** | | Group CEO | 1 | | Group CFO | 1 | | Senior Management | 16 | | **Pension** | The Company operates UK defined contribution pension arrangements, which all UK employees are entitled to participate in. The Executive Directors are entitled to receive an employer pension contribution of 3% of salary, which is aligned with the level available to the majority of the wider workforce in the UK. The CEO and the CFO waive their employer pension contributions. Arrangements for US employees vary depending on territory. In some locations, the Company offers a 3% 401(k) employer match and in other locations a 2% match is offered. | | Element of remuneration | Overview of practice at the Watches of Switzerland Group PLC | | --- | --- | | **Benefits** | We offer a suite of benefits across the Group, which are designed to be appropriate for different roles and functions and countries. These include health insurance (for all US colleagues and some UK colleagues), and in the UK, season ticket loans, a cycle to work scheme, an electric car salary sacrifice scheme, a Health Cash Plan, and UK and US enhanced maternity leave. Life cover is offered to varying degrees depending on grade and region. We operate an Employee Assistance Programme (EAP) in the US and UK. This is intended to help employees deal with any personal problems that may adversely impact their work performance, health and/or wellbeing and financial support. All of our colleagues are entitled to staff discounts, subject to the rules of the relevant schemes. | | **All-employee share schemes** | Our colleagues are able to participate in our sharesave schemes in the US and UK. | A summary of the Company's general policies is as follows: | Policy | Description | | --- | --- | | **Reward** | We have an ethical pay policy and we periodically benchmark salaries against market data. We have implemented interim reviews for relevant groups of colleagues when deemed necessary to guarantee compliance with the legislation, and to ensure our pay rates remain competitive with those of our main competitors. | | **Recognition and celebration** | Our UK recognition programme, VibE, provides all colleagues with the ability to recognise and celebrate achievements across the colleague population instantly via a digital platform. CONNECT, our internal community-based social platform, provides Company news, and enables our colleagues to recognise and celebrate achievements across the Group. | | **Development opportunities** | We are proud of our wide range of training and development programmes in the US and UK and we work closely with our brand partners to ensure that our colleagues are true experts in our category. Our e-learning modules make learning and personal development accessible to all. | | **Equal opportunities and diversity initiatives** | The Company is committed to an active Diversity & Inclusion Policy from recruitment and selection to training and development, performance reviews and promotion. All decisions relating to employment practices are objective, free from bias and based solely upon work criteria and individual merit. The Company is responsive to the needs of its colleagues, clients and the community. We are an organisation that seeks to make use of everyone's talents and abilities, and where diversity is valued. The Company ensures that its promotion and recruitment practices are fair and objective and encourages the continuous development and training, as well as the provision of equal opportunities for the training and career development, of all colleagues. | THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 100 --- # DIRECTORS' REPORT WATCHES OF SWITZERLAND GROUP PLC The Directors present their report, together with the audited Consolidated Financial Statements of the Group and of the Company, for the financial period ended 3 May 2026. The Directors' Report, prepared in accordance with the requirements of the Companies Act 2006, the UK Listing Rules and the Disclosure and Transparency Rules, comprises the Governance Report (pages 151 to 197), the Directors' Report (pages 198 to 201) and the Shareholder Information (page 266). STATUTORY INFORMATION | Topic | Section of the report | Page(s) | | --- | --- | --- | | Important events impacting the business | Strategic Report | 6 to 147 | | Financial instruments | Note 23 to the Consolidated Financial Statements | 248 | | Colleague disabilities | Environment, Social and Governance | 199 | | Modern Slavery Statement | Environment, Social and Governance | 36 | | Greenhouse gas emissions, energy consumption and energy-efficient action | Environment, Social and Governance | 122 | | Carbon reporting | Environment, Social and Governance | 122 | | Risk management | Risk Management | 138 | | S172(1) Companies Act 2006 | Strategic Report | 76 to 79 | | Diversity and ethnicity | Corporate Governance Report Nomination Committee Report | 169 173 | | Directors' interests in shares | Remuneration Committee Report | 194 | | Directors' long-term incentive share awards | Remuneration Committee Report | 194 | | Going concern | Going Concern and Viability Statement | 148 149 | | Likely future developments | Strategic Report | 6 to 147 | | Research and Development | Strategic Report | 6 to 147 | | Branches – A list of our subsidiaries, associates and joint ventures | Financial Statements | 258 | Statement of Engagement with Colleagues The Group has chosen to provide information in relation to the Statement of Engagement with Colleagues elsewhere in this report. This is cross referenced in the table below: | Topic | Section of the report | Page | | --- | --- | --- | | How the Directors engage with colleagues | Section 172(1) Statement Board activity | 76 | | How the Group provides colleagues with information on matters of concern to them as colleagues | Environment, Social and Governance | 80 | | How the Group consults with and considers colleague feedback | Environment, Social and Governance | 80 | | Non-Financial Information and Sustainability Information Statement | Non-Financial and Sustainability Information Statement | 75 | Business relationships | Topic | Section of the report | Page | | --- | --- | --- | | Foster the Company's business relationships | Section 172(1) Statement | 76 | | Principal decisions affecting suppliers, clients and others taken by the Company during the financial year | Section 172(1) Statement Board activity | 76 | PRINCIPAL ACTIVITIES The principal activity of the Group is the sale of luxury watches and jewellery. ARTICLES OF ASSOCIATION In accordance with the Companies Act 2006, the Articles of Association (the 'Articles') may only be amended by a special resolution of the Company's shareholders at a general meeting. AGM The 2026 AGM of the Company will be held at 2.30pm on 3 September 2026, at our offices at 36 North Row, London W1K 6DH. The Notice of AGM is given, together with explanatory notes, in the booklet which accompanies this Annual Report and Accounts. BOARD OF DIRECTORS | Ian Carter | | --- | | Brian Duffy | | Anders Romberg | | Tea Colaianni MBE | | Paul Edgecliffe-Johnson (appointed 19 February 2026) | | Baroness (Rosa) Monckton MBE | | Chabi Nouri | | Robert Moorhead (resigned 19 November 2025) | Except as stated above, all Directors have served throughout the year. Full biographies of the current Directors can be found on pages 156 and 157. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 198 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS ## APPOINTMENT AND REMOVAL OF A DIRECTOR The appointment, reappointment and replacement of Directors is governed by the Articles, the UK Corporate Governance Code 2024 (the 'Code'), the Companies Act 2006 and related legislation. The Code recommends that all directors of publicly listed companies stand for election every year. At the 2025 AGM, all members of the Board stood for election or re-election and were duly elected. At the 2026 AGM, Paul Edgelliffe-Johnson will be offering himself for election as he was appointed as a Director since the last AGM. All other Directors will be offering themselves for re-election. The Board is satisfied that each Non-Executive Director, offering themselves for election or re-election, is independent in both character and judgement, and that their experience, knowledge and other business interests enable them to contribute significantly to the work and balance of the Board. A Director may be appointed to the Board by: - (i) Ordinary resolution of the shareholders - (ii) Board approval following recommendation by the Nomination Committee - (iii) Ordinary resolution if the Director chooses to seek re-election at a general meeting Directors may appoint a Director to fill a vacancy or as an additional Director, provided that the individual retires at the next AGM, if they are to continue, they must offer themselves for election. A Director must vacate office in certain circumstances as set out in the Company's Articles and may be removed by ordinary resolution provided special notice of that resolution has been given. ## POWERS OF THE DIRECTORS Subject to the Articles, the Companies Act 2006 and any directions given by the Company by special resolution and any relevant statutes and regulations, the business of the Company will be managed by the Board which may exercise all the powers of the Company. Specific powers relating to the allotment and issuance of ordinary shares and the ability of the Company to purchase its own securities are also included within the Articles, and such authorities may be submitted for approval by the shareholders at the AGM each year. ## DIRECTORS' INTERESTS AND CONFLICTS OF INTEREST The Directors' interests in, and options over, ordinary shares in the Company are shown in the Directors' Remuneration Report on Remuneration on page 194. In line with the requirements of the Companies Act 2006, Directors have a statutory duty to avoid situations in which they have, or may have, interests that conflict with those of the Company unless that conflict is first authorised by the Board. The Company has procedures in place for managing conflicts of interest. The Company's Articles contain provisions to allow the Directors to authorise potential conflicts of interest, so that if approved, a Director will not be in breach of his/her duty under company law. In line with the requirements of the Companies Act 2006, each Director has notified the Company of any situation in which they have, or could have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company (a situational conflict). Directors have a continuing duty to update any changes to their conflicts of interest, and a note is then made of that update. During the year, the conflicts of interest procedures operated effectively. ## DIRECTORS' INDEMNITIES Directors' and Officers' insurance has been established for all Directors and Officers to provide cover against their reasonable actions on behalf of the Company. The Company also indemnifies the Directors under a qualifying indemnity for the purposes of Section 236 of the Companies Act 2006. This indemnity contains provisions that are permitted by the director liability provisions of the Companies Act 2006 and the Company's Articles. ## EQUAL OPPORTUNITIES AND EMPLOYMENT OF PERSONS WITH DISABILITIES The Group has policies on equal opportunities and the employment of persons with disabilities which, through the application of fair employment practices, are intended to ensure that individuals are treated equitably and consistently regardless of age, race, creed, colour, gender, marital or parental status, sexual orientation, religious beliefs and nationality. Applications for employment by persons with disabilities are always fully considered, bearing in mind the respective aptitudes and abilities of the applicant concerned. In the event of colleagues becoming disabled, every effort is made to ensure their employment with the Group is continued and that the appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of a person with disabilities should, as far as possible, be identical to that of a person who does not have a disability. ## DIRECTORS' STATEMENT OF RESPONSIBILITY IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable law and regulations. Company law requires the Directors to prepare Financial Statements for each financial year that give a true and fair view of the state of affairs of the Group and the Company as at the end of the financial year, and of the profit or loss of the Group for the financial year. Under that law the Directors have prepared the Group Financial Statements in accordance with UK adopted international accounting standards and have elected to prepare the Company's Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102 (The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland) and the Companies Act 2006. Under company law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing the Annual Report and Accounts, the Directors are required to: - Select suitable accounting policies in accordance with IAS 8 'Accounting Policies', Changes in Accounting Estimates and Errors (or in respect of the Parent Company Financial Statements, Section 10 of FRS 102) and then apply them consistently - Make judgements and accounting estimates that are reasonable and prudent - Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information - Provide additional disclosures when compliance with the specific requirements in IFRSs (or in respect of the Parent Company Financial Statements, FRS 102) is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance - For the Group Financial Statements, state whether International Financial Reporting Standards in conformity with the requirements of the Companies Act 2006 and UK adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements - For the Parent Company Financial Statements, state whether applicable UK accounting standards, FRS 102, have been followed, subject to any material departures disclosed and explained in the Parent Company Financial Statements - Prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business 199 --- DIRECTORS' REPORT CONTINUED The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Each of the Directors, whose names and functions are listed on pages 156 and 157 confirms that, to the best of their knowledge: - That the Group Financial Statements, which have been prepared in accordance with UK adopted international accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group - That the Annual Report and Accounts 2026, including the Strategic Report, include a fair review of the development and performance of the business and the position of the Company and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face - That they consider the Annual Report and Accounts 2026, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy # COMPANY SECRETARY Laura Battley is the Company Secretary of the Watches of Switzerland Group PLC and its trading UK Group subsidiaries who can be contacted via the Company's Registered Office. # AUDITOR REAPPOINTMENT Having been appointed as the External Auditor in 2019, Ernst & Young LLP has expressed its willingness to continue in its capacity as independent External Auditor of the Company. The Directors are recommending a resolution in favour of this reappointment and a resolution for authorisation of Auditor remuneration at the forthcoming AGM. # DISCLOSURE OF INFORMATION TO THE AUDITOR In accordance with Section 418(2) of the Companies Act 2006, each Director in office at the date the Directors' Report is approved, confirms that: i. So far as the Director is aware, there is no relevant audit information of which the Company's Auditor is unaware. ii. They have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. # DIVIDENDS The Directors do not recommend the payment of a dividend. # POLITICAL DONATIONS The Group made no political donations and incurred no political expenditure during the year. # SHARE CAPITAL AND SHAREHOLDER VOTING RIGHTS The share capital of the Company at 3 May 2026 was as follows: | | Number of shares | Nominal value | | --- | --- | --- | | Allotted, called up and fully paid ordinary shares of £0.0125 each | 233,301,622 | £2,916,270 | All shareholders are entitled to attend and speak at the general meetings of the Company, appoint proxies, receive any dividends, exercise voting rights and transfer shares without restriction. On a show of hands at a general meeting, every member present in-person shall have one vote, and on a poll, every member present in-person or by proxy shall have one vote for every ordinary share held. There are no known arrangements that may restrict the transfer of shares or voting rights. Under the Company's Share Incentive Plan, Trustees hold shares on behalf of colleague participants. The Trustees will only vote on those shares, and receive dividends on those shares, should the Company pay dividends in the future, that a participant beneficially owns, in accordance with the participant's wishes. An Employee Benefit Trust also operates which has discretion to vote on any shares it holds as it sees fit, except any shares participants own beneficially, in which case the Trustee will only vote on such shares as per a participant's instructions. The Trustee of the Employee Benefit Trust has waived its right to dividends on all shares within the Trust. The Company is not aware of any other dividend waivers or voting restrictions in place. # RESTRICTIONS ON THE TRANSFER OF SECURITIES The Articles do not contain any restrictions on the transfer of ordinary shares in the Company other than the usual restrictions applicable where any amount is unpaid on a share. However, restrictions are imposed by laws and regulations such as the prohibition on insider trading and the requirements of the UK Listing Rules whereby PDMR's dealings need to be approved. The Company has adopted a Share Dealing Code to regulate PDMR dealings and has extended the scope of that Code to include certain other colleagues. # AUTHORITY TO ALLOT SHARES Under the Companies Act 2006, the Directors may only allot shares if authorised to do so by the shareholders in a general meeting. # SHAREHOLDER AUTHORITY TO PURCHASE OWN SHARES At the Company's 2025 AGM the Company's shareholders passed a shareholder resolution granting the Company authority to purchase its own shares pursuant to Sections 693 and 701 of the Companies Act 2006. The authority is limited to an aggregate maximum number of 23,330,162 ordinary shares, representing 10% of the Company's issued share capital, excluding treasury shares. The maximum price which may be paid for an ordinary share will be an amount which is not more than the higher of (i) 5% above the average of the middle market quotation for an ordinary share as derived from the London Stock Exchange Plc's Daily Official List for the five business days immediately preceding the day on which the ordinary share is contracted to be purchased; and (ii) the higher of the price of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out (in each case, exclusive of expenses). THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 200 --- The authority shall, unless varied, revoked or renewed, expire at the end of the Company's 2026 AGM or, if earlier, at close of business on 3 December 2027, when a resolution to renew the authority to purchase Company shares will be submitted to shareholders. During the financial period, 2,966,221 ordinary shares of £0.0125 each (representing 1.3% of the ordinary shares in issue at 3 May 2026) were purchased by the Company for a total consideration of £12,994,335, including expenses, and subsequently cancelled. There are currently no shares held in Treasury. The purpose of the share buyback programme was to reduce the capital of the Company. #### FINANCIAL INSTRUMENTS Information regarding the Company's use of financial instruments, financial risk management objectives and policies can be found in the Risk Management section of the Strategic Report on pages 138 to 147 and note 23 of the Consolidated Financial Statements. #### CHANGE OF CONTROL There are no agreements between the Company and its Directors or colleagues providing for compensation for loss of office or employment (whether through resignation, purported redundancy or otherwise) by reason of a takeover bid. Details concerning the impact on the annual bonus (cash and deferred share awards) and LTIPs held by Directors and Senior Management in the event of a change of control are set out in the Remuneration Policy which was approved by shareholders at the AGM in 2025. Various agreements that the Group has entered into with third parties, including key distribution agreements with luxury watch and jewellery brands, lease agreements, as well as contracts with third-party service providers, provide such parties with a right to terminate the agreement in the event of a change of control. The £225.0 million multicurrency revolving loan facility entered into on 9 May 2023 includes certain customary mandatory prepayment and cancellation events, including mandatory prepayments on a change of control of either Watches of Switzerland Group PLC or Jewel UK Midco Limited if a lender so requests after a period of negotiations. Additionally the £150.0 million multicurrency term and revolving facilities agreement entered into on 13 December 2024 (of which the £100.0 million term loan element is drawn down as $125.0 million), includes certain customary mandatory prepayment and cancellation events, including mandatory prepayments on a change of control of either Watches of Switzerland Group PLC or Jewel UK Midco Limited if a lender so requests after a period of negotiations. #### SIGNIFICANT SHAREHOLDERS AND INTEREST IN VOTING RIGHTS The table below shows the notifiable interests in the Company's ordinary issued share capital, as at the date of this report. As notified in accordance with the Disclosure Guidance and Transparency Rules and information provided directly to the Company, the table below shows holdings which represent 3% or more of the Company's issued ordinary share capital. These holdings may have changed since the Company was notified. However, notification of any change is not required until the next notifiable threshold is crossed. | Notifiable interest | Voting rights | % of capital disclosed | Nature of holding as per disclosure | | --- | --- | --- | --- | | BlackRock, Inc. | 11,772,653 | 5.04 | – Indirect interest 4.68% – Securities Lending 0.03% – CFD 0.33% | | The Capital Group Companies, Inc. | 11,694,450 | 5.01 | – Indirect interest 5.01% | | Brian Duffy | 7,696,999 | 3.21 | – Direct interest 3.21% | | Alberta Investment Management Corporation | 7,075,000 | 3.00 | – Direct interest 3.00% | #### TRANSACTIONS WITH RELATED PARTIES Refer to note 24 on page 252 of the Consolidated Financial Statements for details of related party transactions in the year. #### APPROVAL OF THE ANNUAL REPORT AND ACCOUNTS The Strategic Report on pages 6 to 149, the Directors' Report on pages 198 to 201 and the Corporate Governance Report were approved by the Board on 13 July 2026. Approved by the Board and signed on its behalf. LAURA BATTLEY COMPANY SECRETARY 13 July 2026 STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 201 --- THE WATCHES OF SWITZERLAND GROUP-PLG-ANNUAL REPORT AND ACCOUNTS 2026 # FINANCIAL STATEMENTS 202 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 204 Independent Auditor's Report 210 Consolidated Income Statement 211 Consolidated Statement of Comprehensive Income 212 Consolidated Balance Sheet 213 Consolidated Statement of Changes in Equity 214 Consolidated Statement of Cash Flows 215 Notes to the Consolidated Financial Statements 255 Company Balance Sheet 256 Company Statement of Changes in Equity 257 Notes to the Company Financial Statements 261 Glossary 266 Shareholder Information 203 --- # INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WATCHES OF SWITZERLAND GROUP PLC # OPINION In our opinion: - Watches of Switzerland Group PLC's Group Financial Statements and Parent Company Financial Statements (the 'Financial Statements') give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 3 May 2026 and of the Group's profit for the 53-weeks then ended; - the Group Financial Statements have been properly prepared in accordance with UK adopted international accounting standards; - the Parent Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and - the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the Financial Statements of Watches of Switzerland Group PLC (the 'Parent Company') and its subsidiaries (the 'Group') for the 53-week period ended 3 May 2026 which comprise: | Group | Parent Company | | --- | --- | | Consolidated Income Statement for the 53-weeks ended 3 May 2026 | Company Balance Sheet as at 3 May 2026 | | Consolidated Statement of Comprehensive Income for the 53-weeks ended 3 May 2026 | Company Statement of Changes in Equity as at 3 May 2026 | | Consolidated Balance Sheet as at 3 May 2026 | Related notes C1 to C10 to the Financial Statements including a summary of significant accounting policies | | Consolidated Statement of Changes in Equity as at 3 May 2026 | | | Consolidated Statement of Cash Flows for the 53-weeks ended 3 May 2026 | | | Related notes 1 to 27 to the Financial Statements, including material accounting policy information | | The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law and UK adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the Parent Company Financial Statements is applicable law and United Kingdom Accounting Standards, including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice). # BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. # INDEPENDENCE We are independent of the Group and Parent in accordance with the ethical requirements that are relevant to our audit of the Financial Statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by the FRC's Ethical Standard were not provided to the Group or the Parent Company and we remain independent of the Group and the Parent Company in conducting the audit. # CONCLUSIONS RELATING TO GOING CONCERN In auditing the Financial Statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the Financial Statements is appropriate. Our evaluation of the directors' assessment of the Group and Parent Company's ability to continue to adopt the going concern basis of accounting included: - Obtaining management's going concern assessment, which covers the period to 31 October 2027, and includes details of facilities available, forecast covenant calculations, and the results of management's downside sensitivity scenarios and reverse stress test; - Testing management's model for clerical accuracy; - Understanding and assessing the design effectiveness of controls over the Directors' going concern assessment and management's forecasting process; - Obtaining the agreements in respect of the Group's financing arrangements and confirming the maturity dates and covenants that are required to be met; - Challenging the reasonableness of forecasts and key assumptions underpinning the going concern model, which are based on the FY27 base case forecast approved by the Board in May 2026 plus a further six-month period which assumes no additional sales or profit uplift. Our procedures included assessing changes from the prior period, ensuring the forecast appropriately reflect the Group's climate change commitments, comparing to external forecasts for the sector and considering whether there was any indication of management bias, including consideration of any contrary indicators; - Performing sensitivity analysis to challenge management's assessment of the impact of climate change based on their TCFD disclosures; - Considering management's historical forecast accuracy by comparing actual performance to that budgeted; - Comparing actual performance and liquidity post year-end to that budgeted; - Reperforming forecast covenant calculations and comparing to the requirements under the facility agreements; - Assessing the Group's severe but plausible downside scenarios which factor in the potential effect of a reduction in sales due to reduced consumer confidence, and macroeconomic factors. This assessment included challenging the assumptions and whether the quantum of the impact of the downside scenarios is sufficiently severe; - Challenging whether the scenarios modelled appropriately consider the Group's principal risks and uncertainties; - Assessing the mitigating factors available to management should downside scenarios be worse than anticipated, including challenging whether these are realistic and controllable; - Assessing the reverse stress tests used by the Directors to determine the risk to liquidity and covenant compliance. Including performing appropriate sensitivity analysis and assessing the likelihood of this occurring; - Performing a suite of procedures, including management enquiry to identify events or conditions beyond the period of assessment that may cast significant doubt on the entity's ability to continue as a going concern; and - Assessing the going concern disclosures in the Financial Statements to assess whether they are in accordance with regulatory and legislative requirements. Our key observations are that the director's assessment forecasts that the Group will maintain sufficient liquidity and comply with all covenants throughout the going concern assessment period in both the base case and plausible downside scenarios. The directors consider that the possibility of the reverse stress scenario occurring to be remote taking into account liquidity and covenant headroom, as well as mitigating actions within the Group's control and the fact that this would represent a significant reduction in sales and margin from prior financial years. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and Parent Company's ability to continue as a going concern for a period to 31 October 2027. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 204 --- In relation to the Group and Parent Company's reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors' statement in the Financial Statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group's ability to continue as a going concern. #### Overview of our audit approach | Audit scope | – We performed an audit of the complete financial information of three components and audit procedures on specific balances for a further two components. We also performed specified audit procedures on certain accounts on one additional component. Centralised procedures were performed on Cash, Loans and Borrowings, Taxation, Pensions, Exceptional items, Leases, Equity and Consolidation Adjustments | | --- | --- | | Key audit matters | – Showroom asset impairment – Inventory provision valuation – Revenue recognition including the risk of management override | | Materiality | – Overall Group materiality of £7.1 million which represents 5% of profit before tax and exceptional items | #### AN OVERVIEW OF THE SCOPE OF THE PARENT COMPANY AND GROUP AUDITS We have followed a risk-based approach when developing our audit approach to obtain sufficient appropriate audit evidence on which to base our audit opinion. We performed risk assessment procedures, to identify and assess risks of material misstatement of the Group Financial Statements and identified significant accounts and disclosures. When identifying components at which audit work needed to be performed to respond to the identified risks of material misstatement of the Group Financial Statements, we considered our understanding of the Group and its business environment, the potential impact of climate change, the applicable financial framework, the Group's system of internal control at the entity level, the existence of centralised processes, applications and any relevant Internal Audit results. We determined that centralised audit procedures can be performed on 15 components in the following audit areas: Cash, Loans and Borrowings, Taxation, Pensions, Exceptional items, Leases and Equity. We then identified five components as individually relevant to the Group due to significant risks or an area of higher assessed risk of material misstatement of the Group Financial Statements being associated with the components. For those individually relevant components, we identified the significant accounts where audit work needed to be performed at these components by applying professional judgement, having considered the Group significant accounts on which centralised procedures will be performed, the reasons for identifying the financial reporting component as an individually relevant component and the size of the component's account balance relative to the Group significant financial statement account balance. We then considered whether the remaining Group significant account balances not yet subject to audit procedures, in aggregate, could give rise to a risk of material misstatement of the Group Financial Statements. We selected one component of the Group to include in our audit scope to address these risks. Having identified the components for which work will be performed, we determined the scope to assign to each component. Of the six components selected, we designed and performed audit procedures on the entire financial information of three components ('full scope components'). For two components, we designed and performed audit procedures on specific significant financial statement account balances or disclosures of the financial information of the component ('specific scope components'). For two components, we performed specified audit procedures to obtain evidence for one or more relevant assertions. Our scoping to address the risk of material misstatement for each key audit matter is set out in the Key audit matters section of our report. #### INVOLVEMENT WITH COMPONENT TEAMS In the prior year, we had one component team. However, given increased centralisation of accounting for the component, it was deemed appropriate for the procedures on this component to be performed by the Group audit team. Therefore, all audit work performed for the purposes of the audit was undertaken by the Group audit team. #### CLIMATE CHANGE Stakeholders are increasingly interested in how climate change will impact Watches of Switzerland Group PLC. The Group has determined that the most significant future impacts from climate change on its operations will be from the increased frequency of extreme weather events which may disrupt retail showrooms, offices and distribution centres as well as the supply chain; higher insurance premiums across the businesses operations; the increasing cost of energy and potential regulatory mechanisms on direct carbon emissions; the Group's reliance on premium raw materials; and potential reputational damage resulting from increased scrutiny from stakeholders and investors. These are explained on pages 112 to 119 in the required Task Force On Climate-Related Financial Disclosures and on pages 142 to 147 in the principal risks and uncertainties. They have also explained their climate commitments on pages 102 to 105. All of these disclosures form part of the 'Other information', rather than the audited Financial Statements. Our procedures on these unaudited disclosures therefore consisted solely of considering whether they are materially inconsistent with the Financial Statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on 'Other information'. In planning and performing our audit we assessed the potential impacts of climate change on the Group's business and any consequential material impact on its Financial Statements. The Group has explained in note 1 how they have reflected the impact of climate change in their Financial Statements including how this aligns with their commitment to the aspirations of the Paris Agreement to achieve net zero emissions by 2050. Significant judgements and estimates relating to climate change have been factored into the Directors' showroom asset impairment assessment. These considerations did not have a material impact on the Financial Statements. Our audit effort in considering the impact of climate change on the Financial Statements was focused on evaluating management's assessment of the impact of climate risk, physical and transition, their climate commitments, the effects of material climate risks disclosed on pages 116 to 119 and the significant judgements and estimates disclosed in note 1 and whether these have been appropriately reflected in asset values where these are impacted by future cash flows and associated sensitivity disclosures, being the showroom asset impairment testing (see notes 10 and 12), following the requirements of UK adopted international accounting standards. As part of this evaluation, we performed our own risk assessment, supported by our climate change internal specialists, to determine the risks of material misstatement in the Financial Statements from climate change which needed to be considered in our audit. We also challenged the Directors' considerations of climate change risks in their assessment of going concern and viability and associated disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are described above. Based on our work, whilst we have not identified the impact of climate change on the Financial Statements to be a standalone key audit matter, we have considered the impact on the showroom impairment key audit matter. Details of the impact, our procedures and findings are included in our explanation of key audit matter below. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 205 --- # **INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WATCHES OF SWITZERLAND GROUP PLC CONTINUED** # **KEY AUDIT MATTERS** Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. | Risk | Our response to the risk | Key observations communicated to the Audit & Risk Committee | | --- | --- | --- | | **Showroom asset impairment – £9.9m (FY25 £46.5m)** *Refer to the Audit & Risk Committee Report (page 175); Accounting policies (page 219); and Note 4 and 12 of the Consolidated Financial Statements (pages 227 and 236)* Cash generating units ('CGU') should be reviewed for indicators of impairment at each reporting period end. Judgement is involved in the grouping of showrooms into cash generating units (CGUs). In addition, forecasts and discount rates used in assessing showroom impairment are judgemental and involve estimates of future trading which involves uncertainty. In particular, there is a risk of impairment as a result of the current consumer landscape which adds greater uncertainty on future showroom performance particularly in respect of non-supply constrained brands. | To address the risk we: – Understood and assessed the design effectiveness and implementation of management's controls over the impairment indicator review and impairment test – Validated that management's calculations were performed in accordance with the requirements of IAS 36 – Challenged the US and UK discount rates used with the assistance of EY valuation specialists which included independently determining a reasonable range as a corroboration for the appropriateness of the discount rate used by management – Challenged the showroom cash flow forecasts used by management in calculating the value in use. Our procedures included assessing changes from the prior period, comparing to external forecasts for the industry, considering the potential impacts from climate change, inspecting post year-end results and considering whether there was any indication of management bias, including consideration of any contrary indicators – Challenged the judgements on the identification of cash generating units to assess whether the threshold for grouping showrooms as one CGU had been met – Challenged the long-term growth rates applied by comparing to external forecasts in the US and UK – Assessed the process for allocating forecast cash flows to individual showrooms – Validated impairment test input data and arithmetical accuracy of the model, including the allocation of overheads to CGUs – Independently stress tested the model's key assumptions to determine if any plausible change in assumptions would result in a material change in impairment – Assessed the adequacy of the disclosures in the Financial Statements in respect of the impairment. This included assessing the disclosure on the reasonable possible changes in assumptions in line with the requirements of IAS 36 | Based on our procedures over showroom asset impairment no material misstatements were identified. We consider the showroom asset impairment recognised to be materially stated. Management has appropriately included sensitivity analysis disclosures in note 12 to the Consolidated Financial Statements to reflect the level of estimation uncertainty. | THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 206 --- | Risk | Our response to the risk | Key observations communicated to the Audit & Risk Committee | | --- | --- | --- | | **Inventory valuation – £458.1m of inventory (FY25 £447.4m)** *Refer to the Audit & Risk Committee Report (page 175); Accounting policies (page 220); and Note 15 of the Consolidated Financial Statements (page 240)* The Group sells luxury goods, which have a high carrying value and are subject to changing consumer trends. Management applies judgement to anticipate the saleability of on-hand inventory and to evaluate the liquidation of slow moving and discontinued inventory when calculating the inventory provision. There is greater risk on the inventory provision for products where margins tend to be lower, more variable and impacted by changes in the consumer landscape such as jewellery and non-super high demand products. There is also a heightened risk on the valuation of second-hand watch inventory, including Rolex Certified Pre-Owned ('RCPO'), given the recoverable amount is subject to fluctuations in second hand market prices. | To address the risk we: – Understood and assessed the design effectiveness and implementation of management's controls over the inventory valuation and provision calculation process – Enquired of key members of finance and the merchandising team to understand inventory levels, ageing and plans for discontinuation – Assessed management's judgements and assumptions used in determining the inventory provision to challenge if they were appropriate and supportable and recalculated the provision. We understood the sensitivity of these assumptions to change – Assessed the level of provisioning by specific brand and compared this to performance in the year and stock turn. We directed greater attention to the products likely to be impacted by cost of living challenges as well as pre-owned inventory – Inspected the value of inventory sold at less than cost during the period and challenged management on whether a provision was required for any such products that remain on hand at year-end – In assessing the reasonableness of management's methodology, we have considered the historical level of provisioning and subsequent utilisation and releases to determine the accuracy of prior provisions | Based on our procedures we consider the valuation of inventory to be materially stated. | | **Revenue recognition including the risk of management override – £1,827.9m Revenue (FY25 £1,651.5m)** *Refer to the Audit & Risk Committee Report (page 175); Accounting policies (page 216); and note 2 and 3 of the Consolidated Financial Statements (page 223 and 226)* Our assessment is that the majority of the Group's revenue transactions are non-complex, with no judgement applied over the amount recorded. Revenue recognition is a significant risk by presumption due to the risk of material misstatements as a result of fraudulent or erroneous financial reporting. We consider the revenue recognition significant risk to be in the following areas: – Manual adjustments to revenue; and – Completeness of deferred customer deposits (occurrence of revenue) | To address this risk we: – Understood and assessed the design effectiveness and implementation of management's controls over the revenue recognition process – Performed analytical review procedures to understand the revenue trends compared to the prior period, budget and post year-end to identify areas that warrant further investigation – For the full scope components and specific scope components (totalling 99.7% of Group revenue), we utilised data analytic procedures to test the entire population of postings from Revenue to Cash, correlating the cash conversion of sales. For a sample of these items, we then verified the revenue to the receipt and bank statement – Using data analytic tools, we identified material manual adjustments to revenue that do not follow the core processes such as postings for deferred revenue on deposits for further investigation and corroboration to other audit procedures – Tested the completeness of deposits through the use of data analytics procedures on showroom margins and by testing a sample of deposit releases to revenue in the period confirming the goods were collected before the period end date by inspecting receipts – Tested material consolidation adjustments to revenue and assessed whether they are appropriate – Assessed the year-end consignment revenue accrual estimate through analysing historical trends and current performance | We did not identify any evidence of inappropriate management override through the use of manual journal entries. Based on our procedures in respect of deposits no material misstatements were identified. | There were no changes to our key audit matters reporting in the prior year. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 207 --- # INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WATCHES OF SWITZERLAND GROUP PLC CONTINUED OUR APPLICATION OF MATERIALITY We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion. Materiality The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the Financial Statements. Materiality provides a basis for determining the nature and extent of our audit procedures. We determined materiality for the Group to be £7.1 million (2025: £6.7 million), which is 5% (2025: 5%) of profit before tax and exceptional items. We believe that profit before tax and exceptional items provides us with an appropriate basis for setting materiality as it is not distorted by exceptional items which are both material and occur infrequently and which may fluctuate from period to period. This measure represents Adjusted PBT adding back the impact of IFRS 16 since this recovers each year. | **STARTING BASIS** | Profit before tax – £133.5m | | --- | --- | | **ADJUSTMENTS** | – Exceptional items – £8.8m | | **MATERIALITY** | – Totals £142.3m – Materiality of £7.1m (5% of materiality basis) | During the course of our audit, we reassessed initial materiality and trued this up to final results to reflect the full year actual profit before tax and exceptional items. We determined materiality for the Parent Company to be £9.5 million (2025: £9.2 million), which is 2% (2025: 2%) of equity due to the main purpose of the entity being an investment holding company which does not trade. PERFORMANCE MATERIALITY The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessments, together with our assessment of the Group's overall control environment, our judgement was that performance materiality was 75% (2025: 75%) of our planning materiality, namely £5.3 million (2025: £5.0 million). We have set performance materiality at this percentage as we did not anticipate a significant level of audit differences following our 2025 audit. Audit work was undertaken at component locations for the purpose of responding to the assessed risks of material misstatement of the Group Financial Statements. The performance materiality set for each component is based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of performance materiality allocated to components was £1.1 million to £5.3 million (2025: £1.0 million to £4.9 million). REPORTING THRESHOLD An amount below which identified misstatements are considered as being clearly trivial. We agreed with the Audit & Risk Committee that we would report to them all uncorrected audit differences in excess of £0.36 million (2025: £0.33 million), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion. OTHER INFORMATION The other information comprises the information included in the annual report set out on pages 1 to 201, including the Strategic Report and Corporate Governance Report (which includes the Directors Report), other than the Financial Statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the Financial Statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 In our opinion, the part of the directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. In our opinion, based on the work undertaken in the course of the audit: - the information given in the strategic report and the directors' report for the financial year for which the Financial Statements are prepared is consistent with the Financial Statements; and - the strategic report and the directors' report have been prepared in accordance with applicable legal requirements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: - adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or - the Parent Company Financial Statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or - certain disclosures of directors' remuneration specified by law are not made; or - we have not received all the information and explanations we require for our audit. CORPORATE GOVERNANCE STATEMENT We have reviewed the directors' statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Group and Company's compliance with the provisions of the UK Corporate Governance Code specified for our review by the UK Listing Rules. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the Financial Statements or our knowledge obtained during the audit: - Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified set out on page 148; - Directors' explanation as to its assessment of the Company's prospects, the period this assessment covers and why the period is appropriate set out on page 149; - Directors' statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its liabilities set out on page 149; THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 208 --- - Directors' statement on fair, balanced and understandable set out on page 199; - Board's confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 142; - The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 142; and - The section describing the work of the Audit & Risk Committee set out on page 175. # RESPONSIBILITIES OF DIRECTORS As explained more fully in the directors' responsibilities statement set out on page 199, the directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error. In preparing the Financial Statements, the directors are responsible for assessing the Group and Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. # AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements. # EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the company and management. - We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant are frameworks which are directly relevant to specific assertions in the Financial Statements are those that relate to the reporting framework (UK adopted international accounting standards, FRS 102, the Companies Act 2006 and UK Corporate Governance Code). In addition, we concluded that there are certain significant laws and regulations which may have an effect on the determination of the amounts and disclosures in the Financial Statements being the Listing Rules of the UK Listing Authority, and those laws and regulations relating to General Data Protection Regulation (GDPR), health and safety and employee matters - We understood how Watches of Switzerland Group PLC is complying with those frameworks by making enquiries of management, Internal Audit, those responsible for legal and compliance matters and the Company Secretary and General Counsel. We confirmed our enquiries through our review of Board minutes, papers provided to the Audit & Risk Committee and correspondence received from regulatory bodies - We assessed the susceptibility of the Group's Financial Statements to material misstatement, including how fraud might occur by meeting with management and Internal Audit to understand where they considered there was susceptibility to fraud. We also considered performance targets and the potential incentives or opportunities to manage earnings or influence the perceptions of analysts. We considered the programmes and controls that the Group has established to address risks identified, or that otherwise prevent, deter and detect fraud; and how Senior Management monitors those programmes and controls. Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk as discussed in the key audit matters section above. These procedures included testing manual journals and were designed to provide reasonable assurance that the Financial Statements were free from material fraud - Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved understanding management's internal controls over compliance with laws and regulations; reviewing Internal Audit reports and whistleblowing investigation reports provided to the Audit & Risk Committee; making enquiries of legal counsel, Group management, Internal Audit; involving the use of management and EY specialists and journal entry testing, with a focus on manual consolidation journals and journals indicating large or unusual transactions based on our understanding of the business A further description of our responsibilities for the audit of the Financial Statements is located on the Financial Reporting Council's website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report. # OTHER MATTERS WE ARE REQUIRED TO ADDRESS - Following the recommendation from the Audit & Risk Committee we were appointed by the Company on 19 October 2019 to audit the Financial Statements for the year ending 26 April 2020 and subsequent financial periods - The period of total uninterrupted engagement including previous renewals and reappointments is seven years, covering the years ending 26 April 2020 to 3 May 2026 - The audit opinion is consistent with the additional report to the Audit & Risk Committee # USE OF OUR REPORT This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. HELEN MCLEOD-JONES (SENIOR STATUTORY AUDITOR) FOR AND ON BEHALF OF ERNST & YOUNG LLP, STATUTORY AUDITOR Birmingham 13 July 2026 STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 209 --- # CONSOLIDATED INCOME STATEMENT FOR THE 53 WEEKS ENDED 3 MAY 2026 | | Note | 53 week period ended 3 May 2026 £m | 52 week period ended 27 April 2025 £m | | --- | --- | --- | --- | | **Revenue** | 2, 3 | **1,827.9** | **1,651.5** | | Cost of sales | | (1,590.7) | (1,438.3) | | Exceptional cost of sales | 4 | – | (2.0) | | **GROSS PROFIT** | | **237.2** | **211.2** | | Administrative expenses | | (58.4) | (43.6) | | Exceptional impairment of assets | 4 | (9.9) | (46.5) | | Exceptional reversal of impairment of assets | 4 | 2.3 | – | | Exceptional other administrative expenses | 4 | (1.2) | (7.0) | | Share of result of joint venture and associates | 11 | – | (0.2) | | **OPERATING PROFIT** | | **170.0** | **113.9** | | Finance costs | 7 | (38.2) | (38.1) | | Finance income | 7 | 1.7 | 2.3 | | Exceptional finance costs | 4, 7 | – | (2.2) | | **NET FINANCE COST** | | **(36.5)** | **(38.0)** | | **Profit before taxation** | | **133.5** | **75.9** | | Taxation | 8 | (34.5) | (22.1) | | **Profit for the financial period** | | **99.0** | **53.8** | | **Attributable to:** | | | | | Equity holders of the Company | | 98.8 | 53.8 | | Non-controlling interests | | 0.2 | – | | | | **99.0** | **53.8** | | **EARNINGS PER SHARE** | | | | | **Basic** | 9 | **42.6p** | **22.8p** | | **Diluted** | 9 | **42.6p** | **22.7p** | The notes on pages 215 to 254 are an integral part of these Consolidated Financial Statements. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 210 --- # CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE 53 WEEKS ENDED 3 MAY 2026 | | Note | 53 week period ended 3 May 2026 £m | 52 week period ended 27 April 2025 £m | | --- | --- | --- | --- | | **Profit for the financial period** | | **99.0** | **53.8** | | Other comprehensive (expense)/income: | | | | | **ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS** | | | | | Foreign exchange loss on translation of foreign operations | | (5.4) | (15.2) | | Related current tax movements | 8 | 0.3 | 1.1 | | | | **(5.1)** | **(14.1)** | | **ITEMS THAT WILL NOT BE RECLASSIFIED TO PROFIT OR LOSS** | | | | | Actuarial movements on defined benefit pension scheme | 20 | 0.2 | 0.1 | | | | **0.2** | **0.1** | | **Other comprehensive expense for the period** | | **(4.9)** | **(14.0)** | | **Total comprehensive income for the period** | | **94.1** | **39.8** | | **Attributable to:** | | | | | Equity holders of the Company | | 93.9 | 39.8 | | Non-controlling interests | | 0.2 | – | | | | **94.1** | **39.8** | The notes on pages 215 to 254 are an integral part of these Consolidated Financial Statements. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 211 --- # **CONSOLIDATED BALANCE SHEET AS AT 3 MAY 2026** | | Note | 3 May 2026 £m | 27 April 2025 £m | | --- | --- | --- | --- | | **ASSETS** | | | | | **NON-CURRENT ASSETS** | | | | | Goodwill | 10 | 245.3 | 231.2 | | Intangible assets | 10 | 74.4 | 72.9 | | Property, plant and equipment | 12 | 217.0 | 192.4 | | Right-of-use assets | 13 | 338.2 | 358.6 | | Investment in joint venture and associates | 11 | 0.5 | 0.5 | | Deferred tax assets | 8 | 3.8 | 4.1 | | Post-employment benefit asset | 20 | 1.2 | 0.5 | | Trade and other receivables | 14 | 4.5 | 4.5 | | | | **884.9** | **864.7** | | **CURRENT ASSETS** | | | | | Inventories | 15 | 458.1 | 447.4 | | Current tax asset | | 4.5 | 8.6 | | Trade and other receivables | 14 | 48.5 | 56.0 | | Cash and cash equivalents | 16 | 65.1 | 98.9 | | | | **576.2** | **610.9** | | **Total assets** | | **1,461.1** | **1,475.6** | | **LIABILITIES** | | | | | **CURRENT LIABILITIES** | | | | | Trade and other payables | 17 | (239.5) | (254.9) | | Current tax liability | | (0.5) | (0.5) | | Lease liabilities | 13 | (58.6) | (56.0) | | Provisions | 18 | (2.6) | (2.4) | | | | **(301.2)** | **(313.8)** | | **NON-CURRENT LIABILITIES** | | | | | Trade and other payables | 17 | (11.7) | (4.6) | | Deferred tax liabilities | 8 | (19.5) | (15.9) | | Lease liabilities | 13 | (369.0) | (398.6) | | Borrowings | 19 | (120.5) | (192.8) | | Provisions | 18 | (10.5) | (10.3) | | | | **(531.2)** | **(622.2)** | | **Total liabilities** | | **(832.4)** | **(936.0)** | | **Net assets** | | **628.7** | **539.6** | | **EQUITY** | | | | | Share capital | 21 | 2.9 | 3.0 | | Share premium | 21 | 147.1 | 147.1 | | Capital redemption reserve | 21 | 0.1 | – | | Merger reserve | 21 | (2.2) | (2.2) | | Other reserves | 21 | (18.5) | (13.3) | | Retained earnings | 21 | 514.1 | 414.7 | | Foreign exchange reserve | 21 | (14.8) | (9.7) | | **Total equity** | | **628.7** | **539.6** | The notes on pages 215 to 254 are an integral part of these Consolidated Financial Statements. The Consolidated Financial Statements were approved and authorised for issue by the Board and were signed on its behalf by: **L A ROMBERG** CHIEF FINANCIAL OFFICER Date: 13 July 2026 THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 212 --- # CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 3 MAY 2026 | | Share capital £m | Share premium £m | Capital redemption reserve £m | Merger reserve £m | Other reserves £m | Retained earnings £m | Foreign exchange reserve £m | Equity attributable to owners of the Parent Company £m | Equity attributable to non-controlling interests £m | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | **Balance at 28 April 2024** | **3.0** | **147.1** | **–** | **(2.2)** | **(23.4)** | **394.1** | **4.4** | **523.0** | **–** | **523.0** | | Profit for the financial period | – | – | – | – | – | 53.8 | – | 53.8 | – | 53.8 | | Other comprehensive income, net of tax | – | – | – | – | – | 0.1 | (14.1) | (14.0) | – | (14.0) | | **Total comprehensive income** | **–** | **–** | **–** | **–** | **–** | **53.9** | **(14.1)** | **39.8** | **–** | **39.8** | | Purchase of own shares for cancellation | – | – | – | – | (12.1) | – | – | (12.1) | – | (12.1) | | Own shares cancelled | – | – | – | – | 11.3 | (11.3) | – | – | – | – | | Committed share buyback | – | – | – | – | – | (12.9) | – | (12.9) | – | (12.9) | | Share-based payment charge (note 22) | – | – | – | – | – | 1.8 | – | 1.8 | – | 1.8 | | Share-based payments exercised | – | – | – | – | 10.9 | (10.9) | – | – | – | – | | Tax on items credited to equity | – | – | – | – | – | 0.4 | – | 0.4 | – | 0.4 | | Tax on vested shares moved to current tax | – | – | – | – | – | (0.4) | – | (0.4) | – | (0.4) | | **Total other transactions** | **–** | **–** | **–** | **–** | **10.1** | **(33.3)** | **–** | **(23.2)** | **–** | **(23.2)** | | **Balance at 27 April 2025** | **3.0** | **147.1** | **–** | **(2.2)** | **(13.3)** | **414.7** | **(9.7)** | **539.6** | **–** | **539.6** | | Profit for the financial period | – | – | – | – | – | 98.8 | – | 98.8 | 0.2 | 99.0 | | Other comprehensive income, net of tax | – | – | – | – | – | 0.2 | (5.1) | (4.9) | – | (4.9) | | **Total comprehensive income** | **–** | **–** | **–** | **–** | **–** | **99.0** | **(5.1)** | **93.9** | **0.2** | **94.1** | | Purchase of own shares for cancellation (note 21) | – | – | – | – | (12.9) | – | – | (12.9) | – | (12.9) | | Own shares cancelled (note 21) | (0.1) | – | 0.1 | – | 13.8 | (0.9) | – | 12.9 | – | 12.9 | | Acquisition of non-controlling interests (note 25) | – | – | – | – | – | – | – | – | 1.9 | 1.9 | | Purchase commitment for non-controlling interests (note 25) | – | – | – | – | (6.9) | – | – | (6.9) | (2.1) | (9.0) | | Share-based payment charge (note 22) | – | – | – | – | – | 1.8 | – | 1.8 | – | 1.8 | | Share-based payments exercised | – | – | – | – | 0.8 | (0.8) | – | – | – | – | | Tax on items credited to equity | – | – | – | – | – | 0.3 | – | 0.3 | – | 0.3 | | **Total other transactions** | **(0.1)** | **–** | **0.1** | **–** | **(5.2)** | **0.4** | **–** | **(4.8)** | **(0.2)** | **(5.0)** | | **Balance at 3 May 2026** | **2.9** | **147.1** | **0.1** | **(2.2)** | **(18.5)** | **514.1** | **(14.8)** | **628.7** | **–** | **628.7** | STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 213 --- # **CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE 53 WEEKS ENDED 3 MAY 2026** | | Note | 53 week period ended 3 May 2026 £m | 52 week period ended 27 April 2025 £m | | --- | --- | --- | --- | | **CASH FLOWS FROM OPERATING ACTIVITIES** | | | | | **Profit for the financial period** | | **99.0** | **53.8** | | Adjustments for: | | | | | Depreciation of property, plant and equipment | 12 | 43.4 | 40.8 | | Depreciation of right-of-use assets | 13 | 53.9 | 54.5 | | Depreciation of right-of-use assets – exceptional items (note 4) | 13 | – | 2.0 | | Amortisation of intangible assets | 10 | 3.5 | 3.3 | | Impairment of right-of-use assets – exceptional items (note 4) | 13 | 5.0 | 26.8 | | Reversal of impairment of right-of-use assets – exceptional items (note 4) | 13 | (0.9) | – | | Impairment of property, plant and equipment – exceptional items (note 4) | 12 | 4.9 | 19.7 | | Reversal of impairment of property, plant and equipment – exceptional items (note 4) | 12 | (1.4) | – | | Loss on disposal of property, plant and equipment | 12 | 0.5 | 0.2 | | Loss on disposal of property, plant and equipment – exceptional items (note 4) | 12 | 0.7 | 0.6 | | Loss on disposal of intangible assets | 10 | – | 0.2 | | Gain on lease modifications and disposals | 13 | (4.2) | (5.5) | | Share-based payment charge | 22 | 1.8 | 1.8 | | Share of result of joint venture and associates | 11 | – | 0.2 | | Finance income | 7 | (1.7) | (2.3) | | Finance costs | 7 | 38.2 | 38.1 | | Finance costs – exceptional items (note 4) | 7 | – | 2.2 | | Taxation | 8 | 34.5 | 22.1 | | Increase in inventory | | (5.9) | (13.3) | | Increase in debtors | | (0.8) | (18.2) | | Increase/(decrease) in creditors, provisions and pensions | | 7.1 | (12.9) | | **Cash generated from operations** | | **277.6** | **214.1** | | Defined benefit pension scheme contributions | 20 | (0.7) | (0.7) | | Taxation paid | | (23.3) | (29.7) | | **Total net cash generated from operating activities** | | **253.6** | **183.7** | | **CASH FLOWS FROM INVESTING ACTIVITIES** | | | | | Purchase of non-current assets: | | | | | Property, plant and equipment additions | 12 | (68.3) | (68.0) | | Intangible asset additions | 10 | (3.3) | (3.6) | | Movement on capital expenditure accrual | | 3.7 | (3.8) | | **Cash outflow from purchase of non-current assets** | | **(67.9)** | **(75.4)** | | Interest received | | 1.7 | 2.3 | | Investment in joint venture and associates | | – | (0.7) | | Disposal of European property, plant and equipment | 12 | 0.4 | 2.7 | | Acquisition of subsidiaries net of cash acquired | 25 | (39.3) | (106.9) | | **Total net cash outflow from investing activities** | | **(105.1)** | **(178.0)** | | **CASH FLOWS FROM FINANCING ACTIVITIES** | | | | | Purchase of own shares for cancellation | 21 | (13.8) | (11.3) | | Proceeds of term loan | 19 | – | 99.5 | | Net movement on multicurrency revolving loan facility | 19 | (71.7) | (13.8) | | Costs directly attributable to raising new loan facility | 19 | – | (1.5) | | Payment of capital element of leases | 13 | (58.4) | (56.2) | | Payment of interest element of leases | 13 | (25.5) | (24.4) | | Interest paid | | (12.7) | (13.4) | | **Net cash outflow from financing activities** | | **(182.1)** | **(21.1)** | | **Net decrease in cash and cash equivalents** | | **(33.6)** | **(15.4)** | | Cash and cash equivalents at the beginning of the period | | 98.9 | 115.7 | | Exchange losses on cash and cash equivalents | | (0.2) | (1.4) | | **Cash and cash equivalents at the end of period** | | **65.1** | **98.9** | | Comprised of: | | | | | Cash at bank and in hand | 16 | 42.0 | 80.4 | | Cash in transit | 16 | 23.1 | 18.5 | | **Cash and cash equivalents at end of period** | | **65.1** | **98.9** | THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 214 --- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS # 1. ACCOUNTING POLICIES # GENERAL INFORMATION Watches of Switzerland Group PLC (the 'Company') is a public limited company, limited by shares, which is listed on the London Stock Exchange and incorporated and domiciled in England and Wales. The address of the registered office is Aurum House, 2 Elland Road, Braunstone, Leicester, LE3 1TT. The Company and its subsidiaries together form the Group. The principal activity of the Group is the selling of luxury watches and jewellery, in showrooms, online and via wholesale. At the balance sheet date, the Group was trading from 126 UK-based showrooms, and 65-US based showrooms. The Group mainly trades under eight prestigious brands: Watches of Switzerland (UK and US), Mappin & Webb (UK), Goldsmiths (UK), Mayors (US), Betteridge (US), Deutsch & Deutsch (US), Analog:Shift (US) and Hodinkee (US), with a complementary jewellery offering. The Group also owns the exclusive distribution rights for Roberto Coin in the US, Canada, Central America and the Caribbean. The Consolidated Financial Statements are presented in Pounds Sterling (£), which is the Group's presentational currency, and are shown in £millions to one decimal place. # BASIS OF PREPARATION The Consolidated Financial Statements include the financial statements of the Company and its subsidiary undertakings made up to 3 May 2026. A subsidiary is an entity that is controlled by the parent. The financial year represents the 53 weeks to 3 May 2026 (prior financial year 52 weeks to 27 April 2025). The financial year-end date is determined to be the Sunday closest to 30 April each year. The Consolidated Financial Statements are prepared in accordance with UK adopted international accounting standards. The Consolidated Financial Statements have been prepared under the historical cost convention except for pension assets which are measured at fair value. # GOING CONCERN The Directors consider that the Group has, at the time of approving the Group Consolidated Financial Statements, adequate resources to remain in operation for the foreseeable future and have therefore continued to adopt the going concern basis in preparing the consolidated information. At the balance sheet date, the Group had a total of £367.1 million in available committed facilities, of which £122.1 million was drawn down. Net debt at this date was £57.0 million. Liquidity headroom (defined as unrestricted cash plus undrawn available facilities) was £290.2 million. All bank facilities run coterminously and are due to expire in May 2028. Further detail with regards to covenant tests can be found in borrowings note 19 within the Group Consolidated Financial Statements. The key covenant tests attached to all Group facilities are a measure of net debt to EBITDA, and the Fixed Charge Cover Ratio (FCCR) at each April and October. The facility covenants are on a pre-IFRS 16 basis and exclude share-based payment costs. Net debt to EBITDA is defined as the ratio of total net debt at the reporting date to the last 12-month Adjusted EBITDA. This ratio must not exceed 3. The FCCR is the ratio of Adjusted EBITDA plus rent to the total finance charge and rent for the 12 months to the reporting date. This ratio must exceed 1.6. At 3 May 2026, the Group comfortably satisfied the covenant tests with net debt to EBITDA being less than 3 and the FCCR exceeding 1.6. In assessing whether the going concern basis of accounting is appropriate, the Directors have reviewed various trading scenarios for the going concern period to 31 October 2027 from the date of this report. These included: - (i) The FY27 base case budget which aligns to Guidance given on page 9, plus a further six-month period which for the purpose of this test assumes no additional sales or profit uplift. These included the following key assumptions: - A continued strong luxury watch and jewellery market in the US and UK - Revenue forecast supported by expected luxury watch supply - Impact of all known US tariffs as at the date of this report - Increased cost base in line with macroeconomic environment, employment taxes and environmental targets Under the base case forecast, the Group has significant liquidity and complies with all covenant tests to 31 October 2027. The forecast reflects current visibility of supply from key brands and confirmed showroom refurbishments, openings and closures, and excludes uncommitted capital projects and acquisitions which would only occur if expected to be incremental to the business. (ii) Severe but plausible scenarios of: - 10% reduction in sales against the base case forecast as a result of consumer confidence, macroeconomic and governmental factors. This scenario did not include cost mitigations which are given below - The realisation of material risks detailed within Principal Risks and Uncertainties on pages 142 to 147 (including regulatory and compliance, business interruption, and data protection and cyber security), and also environmental risks highlighted on pages 116 to 119 Under these scenarios the net debt to EBITDA and the FCCR covenants would be complied with. (iii) Reverse stress-testing of cash flows during the going concern period was performed. This determined what level of reduced EBITDA and worst-case cash flows would result in a breach of the liquidity or covenant tests. The likelihood of this level of reduced EBITDA is considered remote taking into account liquidity and covenant headroom, as well as mitigating actions within management's control (as noted below) and that this would represent a significant reduction in sales and margin from prior financial years. Should trading be worse than the outlined severe but plausible scenarios, the Group has the following mitigating actions within management's control: - Reduction of marketing spend - Reduction in the level of inventory holding and purchases - Rationalisation of the business with headcount and showroom operations savings - Redundancies and pay freezes - Reducing the level of planned capex The Directors also considered whether there were any events or conditions occurring just outside the going concern period that should be considered in their assessment, including whether the going concern period needed to be extended. None were noted. As a result of the above analysis, including potential severe but plausible scenarios and the reverse stress test, the Board believes that the Group and Company are able to adequately manage its financing and principal risks, and that the Group and Company will be able to operate within the level of its facilities and meet the required covenants for the period to 31 October 2027. For this reason, the Board considers it appropriate for the Group and Company to adopt the going concern basis in preparing the Consolidated Financial Statements. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 215 --- # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED # I. ACCOUNTING POLICIES (CONTINUED) # CLIMATE CHANGE In preparing the Consolidated Financial Statements management has considered the impact of climate change, particularly in the context of the disclosures included in the Strategic Report. These considerations did not have a material impact on the Consolidated Financial Statements, including the Group's going concern assessment to 31 October 2027 and the viability of the Group over the next three years (refer to the Viability Statement on page 149). # EXCEPTIONAL ITEMS The Group presents as exceptional items on the face of the Consolidated Income Statement those items of income and expense which, because of their size, nature or the expected infrequency of the events giving rise to them, merit separate presentation to provide a better understanding of the elements of financial performance in the financial period, so as to assess trends in financial performance. # ALTERNATIVE PERFORMANCE MEASURES (APMs) The Group has identified certain measures that it believes will assist the understanding of the performance of the business. These APMs are not defined or specified under the requirements of IFRS. The Group believes that these APMs, which are not considered to be a substitute for, or superior to, IFRS measures, provide stakeholders with additional useful information on the underlying trends, performance and position of the Group and are consistent with how business performance is measured internally. The APMs are not defined by IFRS and therefore may not be directly comparable with other companies' APMs. The key APMs that the Group uses include: Net Margin, Adjusted EBITDA, Adjusted EBIT and Adjusted Earnings Per Share. These APMs are set out in the Glossary on pages 261 to 265, including explanations of how they are calculated and how they are reconciled to a statutory measure where relevant. The Group makes certain adjustments to the statutory profit measures in order to derive many of these APMs. The Group's policy is to exclude items that are considered non-underlying and exceptional due to their size, nature or incidence, and are not considered to be part of the normal operating costs of the Group. Treatment as an adjusting item provides stakeholders with additional useful information to assess the year-on-year trading performance of the Group but should not be considered in isolation of statutory measures. # FOREIGN CURRENCIES The Consolidated Financial Statements are presented in Pounds Sterling (£), which is the Group's presentational currency, and are shown in £millions to one decimal place. The Group includes foreign entities whose functional currencies are not Pounds Sterling (£). On consolidation, the assets and liabilities of those entities are translated at the exchange rates at the balance sheet date and income and expenses are translated at average rates during the period. Translation differences are recognised in other comprehensive income. Transactions in currencies other than an entity's functional currency are recorded at the exchange rate on the transaction date, whilst assets and liabilities are translated at exchange rates at the balance sheet date. Exchange differences are recognised in the Consolidated Income Statement. # SEGMENT REPORTING Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Makers (CODMs). The CODMs, who are responsible for allocating resources and assessing performance of the operating segments, have been identified as the Chief Executive Officer and Chief Financial Officer of the Group. The CODMs review the key profit measures Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and Adjusted Earnings Before Interest and Tax (EBIT), both shown pre-exceptional items and IFRS 16. # REVENUE The Group is in the business of selling luxury watches and jewellery and providing ongoing services to our customers, such as repairs and servicing. Revenue from contracts with customers is recognised when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has concluded that it is the principal in its revenue arrangements because it controls the goods or services before transferring them to the customer. In determining the transaction price for the sale of goods, the Group considers the existence of significant financing components. # Sale of goods – retail Sales of goods are recognised when a Group entity sells a product to the customer and control of the goods is transferred to the customer. Retail sales are usually settled in cash or by credit card. It is the Group's policy to sell its products to the retail customer with a right to return generally within 14 days for a cash refund and 30 days for a product exchange, subject to variations by products and regions. The Group does not operate any loyalty programmes. Where sales are made on credit provided by a third party, revenue is recognised immediately on sale of the product and control has been passed to the customer. The Group offers Interest-Free and Interest-Bearing Credit on certain goods and the cost of this product is netted against revenue. # Sale of goods – wholesale Sales of goods are recognised when a Group entity sells a product to a customer and control of the goods is transferred to the customer. This is either upon delivery to customers, or for consigned inventory, the date of sell through by the customer, provided the sales price is fixed, title has transferred, and collectability of the resulting receivable is reasonably assured. # Sale of goods – online Revenue from the sale of goods on the internet is recognised at the point that control has passed to the customer, which is the point of delivery. Transactions are settled by credit or payment card. Where sales are made on credit provided by a third party, revenue is recognised when control has been passed to the customer, on delivery. # Rendering of services Revenue from a contract to provide services, such as product repairs and servicing, is recognised when the following conditions are satisfied: - The amount of revenue can be measured reliably - It is probable that the Group will receive the consideration due under the contract - The service has been completed - Control of the good is passed back to the customer # Rights of return The Group uses the expected value method to estimate the variable consideration given the large number of contracts that have similar characteristics. The Group then applies the requirements on constraining estimates of variable consideration in order to determine the amount of variable consideration that can be included in the transaction price and recognised as revenue. A refund liability is recognised for the goods that are expected to be returned (i.e., the amount not included in the transaction price). A right of return asset (and corresponding adjustment to cost of sales) is also recognised for the right to recover the goods from the customer. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 216 --- ### Contract balances – customer deposits and gift cards A customer deposit or gift card liability is the obligation to transfer goods or services to a customer for which the Group has received consideration. If consideration is received before the Group transfers goods or services to the customer, revenue is deferred and a customer deposit or gift card liability is recognised. Customer deposits and gift cards are recognised as revenue when the customer is passed control of the goods. Gift card redemptions are estimated on the basis of historical redemptions and are reviewed regularly and updated to reflect management's best estimate of patterns of redemption. The estimated non-redemption is recognised in revenue based on historical redemptions. ### Cost of sales Included within cost of sales are any items which are directly attributable to the sale of goods and services. This includes the cost of bringing inventory into a condition to sell, wages and salaries, depreciation on land and buildings and fittings and equipment, and other costs directly attributable to the cost of selling goods and services. ### Supplier income The Group enters into agreements with suppliers to share the costs and benefits of marketing activities and volume growth. Supplier income is recognised when earned, being when all conditions for entitlement have been satisfied and the amount can be measured reliably in accordance with the contractual terms. This income is recognised as a reduction of cost of sales. Where the income relates to inventory held by the Group at the reporting date, it is included in the carrying value of that inventory and recognised in cost of sales when the inventory is sold. Uncollected supplier income at the reporting date is classified within the Consolidated Financial Statements as follows: - trade payables: supplier income is offset against amounts payable to the same supplier where the Group has a legally enforceable right of offset and intends to settle on a net basis - other receivables: supplier income is recognised within other receivables where it has been earned but not yet invoiced at the reporting date, or where the criteria for offset against trade payables are not met ### Insurance contracts Commission income is earned by the Group in showrooms and online through the sale of insurance policies. In addition, the Group issues contracts that transfer insurance risk which are classified as insurance contracts. This activity is completed through the Aurum Insurance (Guernsey) Limited subsidiary which is fully consolidated. The Group manages its risk via its underwriting strategy within its overall risk management framework. Premiums are earned from the date of the attachment of risk, over the indemnity period, based on the pattern of risks underwritten. The earned portion of premiums written is recognised as revenue. Unearned premium represents the proportion of premiums written which is estimated to be earned in future financial years, calculated separately for each insurance contract using the daily pro-rata method. Claims and claims handling expenses are recognised as incurred based on the estimated cost of settling all liabilities arising on events occurring up to the balance sheet date. ### Share-based payments Some employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions). The fair value of the equity-settled awards is calculated at grant date using a Black-Scholes model. The resulting cost is charged in the Consolidated Income Statement over the vesting period of the option or award and is regularly reviewed and adjusted for the expected and actual number of options or awards vesting. This applies to LTIP Awards, Deferred Share Bonus Schemes, Save as You Earn and Employee Stock Purchase Plan Awards, and Free Share Awards. Service and non-service performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group's best estimate of the number of equity instruments that will ultimately vest. No expense is recognised for awards that do not ultimately vest because of non-market performance and/or service conditions that have not been met. The social security contributions payable in connection with the award of the share options is determined at each balance sheet date as a liability with the total cost recognised in the Consolidated Income Statement over the vesting period. ### Own shares held Own shares represent the shares of Watches of Switzerland Group PLC that are held in an Employee Benefit Trust which has been set up for this purpose. The Company adopts a 'look-through' approach which, in substance, accounts for the trust as an extension of the Company. Own shares are recorded at cost and are deducted from equity. ### Purchase commitment for non-controlling interests The Group has granted put options to the non-controlling interests of Deutsch & Deutsch (WOS) LLC. In the absence of specific guidance from the International Accounting Standards Board on accounting for these arrangements, the Group recognises the related commitments as follows: - the non-controlling interests are adjusted for allocations of profit, OCI and dividends in the reporting period. The non-controlling interests are then derecognised as if the interests were acquired at the reporting date. The corresponding liability arising from the put options is recognised at the present value of the amount payable on exercise of the put options within purchase commitment for non-controlling interests in liabilities - the difference between the carrying amount of the non-controlling interests derecognised and the amount of the related liability is recognised directly in equity within other reserves - This process is repeated at each reporting date until the put options are exercised or expired. If the options are exercised, the same treatment is applied up to the date of exercise. The amount recognised as the financial liability at that date is extinguished by the payment of the exercise price. If the options expire unexercised, the financial liability is derecognised and non-controlling interests are reinstated as if the put option never existed This recognition method has no effect on the presentation of non-controlling interests within the Consolidated Income Statement. The liability is represented as current where settlement could be enforced within the next 12 months. The remaining balance of the liability is classified as non-current. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 217 --- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED # 1. ACCOUNTING POLICIES (CONTINUED) # Taxation Taxation, comprised of current and deferred tax, is charged or credited to the Consolidated Income Statement unless it relates to items recognised in other comprehensive income or directly in equity. In such cases, the related tax is also recognised in other comprehensive income or directly in equity. Current tax liabilities are measured at the amount expected to be paid, based on tax rates and laws that are enacted or substantively enacted at the balance sheet date. Deferred tax is accounted for using the balance sheet liability method and is calculated using rates of taxation enacted or substantively enacted at the balance sheet date which are expected to apply when the asset or liability is settled. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are only recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is not recognised in respect of investments in subsidiaries where the reversal of any taxable temporary differences can be controlled and are unlikely to reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset and there is an intention to settle the balances on a net basis. The Group has applied the temporary exemption under IAS 12 in relation to the accounting for deferred taxes arising from the implementation of the Pillar Two rules, so that the Group neither recognises nor discloses information about deferred tax assets and liabilities related to Pillar Two. # Business combinations and goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. Acquisition-related costs are expensed as incurred and included in administrative expenses. The Group determines that it has acquired a business when the acquired set of activities and assets include an input and a substantive process that together significantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical to the ability to continue producing outputs, and the inputs acquired include an organised workforce with the necessary skills, knowledge or experience to perform that process or it significantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without significant cost, effort or delay in the ability to continue producing outputs. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 'Financial Instruments', is measured at fair value with the changes in fair value recognised in the Consolidated Income Statement in accordance with IFRS 9. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group reassesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amount to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss. For each business combination, the Group elects to measure non-controlling interests either at fair value or at the proportionate share of the acquiree's identifiable net assets. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. # Joint venture and associates The Group presents its share of profit or loss of joint venture and associates using the equity method under IAS 28 'Investments in Associates and Joint Ventures'. IAS 1.82(c) requires share of the profit or loss of joint venture and associates accounted for using the equity method to be presented in a separate line item on the face of the Consolidated Income Statement. In complying with this requirement, the Group combines the share of profit or loss in one line item. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment. At each reporting date, the Group determines whether there is objective evidence that the investment is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount and its carrying value and then recognises the loss within 'Share of result of joint venture and associates' in the Consolidated Income Statement. # Intangible assets Expenditure on internally generated goodwill and brands is recognised in the Consolidated Income Statement as an expense as incurred. Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses. The cost of intangible assets acquired in a business combination is capitalised separately from goodwill if the fair value can be measured reliably at the acquisition date. Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit (CGU) level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Acquired computer software licences are capitalised based on the costs incurred to acquire and bring to use the specific software. Software is measured initially at acquisition cost or costs incurred to develop the asset. Following initial recognition, software is carried at cost less accumulated amortisation. Assets are amortised on a straight-line basis over their estimated useful lives of three to five years. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 218 --- # Cloud software licence agreements Licence agreements to use cloud software are treated as service contracts and expensed in the Consolidated Income Statement, unless the Group has both a contractual right to take possession of the software at any time without significant penalty, and the ability to run the software independently of the host vendor. In such cases the licence agreement is capitalised as software within intangible assets. Costs to configure or customise a cloud software licence are expensed alongside the related service contract in the Consolidated Income Statement, unless they create a separately identifiable resource controlled by the Group, in which case they are capitalised. # Amortisation Amortisation is charged to the Consolidated Income Statement on a straight-line basis over the estimated useful lives of intangible assets. Amortisation is recognised wholly within cost of sales. Intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: | Computer software | 3 to 5 years | | --- | --- | | Brands | 5 to 30 years | | Agency agreements | 10 years | The bases for choosing these useful lives are: - Brand longevity considering brand history and market awareness - Agency agreements considering the longevity of the agreements in place with a major supplier The Group reviews the amortisation period and method when events and circumstances indicate that the useful life may have changed since the last reporting date. # Property, plant and equipment Management accounts for property, plant and equipment under the cost basis of IAS 16 'Property, plant and equipment', rather than applying the alternative (revaluation) treatment. The cost of property, plant and equipment includes directly attributable costs. Depreciation is provided on the cost of all other assets (except assets in the course of construction), so as to write off the cost, less residual value, on a straight-line basis over the expected useful economic life of the assets concerned, as follows: | Land and buildings | Lease period | | --- | --- | | Fittings and equipment | 3 to 10 years | Useful lives and residual values are reviewed at each balance sheet date and revised where expectations are significantly different from previous estimates. In such cases, the depreciation charge for current and future periods is adjusted accordingly. The impact of climate change on asset lives has also been considered in the period. Asset lives are not affected by climate actions taking place. # Impairment of non-financial assets The carrying values of non-financial assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any impairment loss arises, the asset is adjusted to its estimated recoverable amount and the difference is recognised in the Income Statement. Property, plant and equipment and other non-current assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount of an asset or a CGU is not recoverable. A CGU is the smallest identifiable group of assets that generate independent cash flows which are monitored by management and the CODMs. The Group considers this to be showroom locations or offices. CGUs are grouped for the purposes of allocating goodwill where the CGU group is expected to benefit from synergies, such as sharing of centralised functions and management. Goodwill allocated to groups of CGUs is tested annually for impairment and whenever there is an indication that the goodwill may be impaired. Impairment testing is performed at several levels and applied in the order set out by IAS 36 'Impairment of assets'. Impairment testing is first applied to the assets within a CGU where the value of assets held by the CGU are compared to the recoverable value. Impairment testing is then performed at a higher level which compares the value of goodwill to the recoverable value of the associated group of CGUs. # Trade and other receivables Trade receivables represent outstanding customer balances less an allowance for expected credit losses. Trade receivables are recognised when the Group becomes party to the contract which happens when the goods are received and controlled by the end user. They are derecognised when the rights to receive the cash flows have expired e.g. due to the settlement of the outstanding amount or where the Group has transferred substantially all the risks and rewards associated with that contract. Other receivables are stated at invoice value less an allowance for expected credit losses. Trade and other receivables are subsequently measured at amortised cost as the business model is to collect contractual cash flows and the debt meets the Solely Payment of Principal and Interest (SPPI) criterion. # Expected Credit Losses (ECLs) The Group recognises an allowance for ECLs for customer and other receivables. IFRS 9 'Financial instruments' requires a provision to be recognised on origination of a customer advance, based on its ECL. The Directors have taken the simplification available under IFRS 9 5.5.15 which allows the loss amount in relation to a trade receivable to be measured at initial recognition and throughout its life at an amount equal to lifetime ECL. This simplification is permitted where there is either no significant financing component (such as customer receivables where the customer is expected to repay the balance in full prior to interest accruing) or where there is a significant financing component (such as where the customer expects to repay only the minimum amount each month), but the Directors make an accounting policy choice to adopt the simplification. Adoption of this approach means that Significant Increase in Credit Risk (SICR) and Date of Initial Recognition (DOIR) concepts are not applicable to the Group's ECL calculations. Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. Trade and other receivables are only written off when the Group has exhausted all options to recover the amounts due and provided for in full when there is no reasonable expectation of recovery, which is the Group's definition of default. The assessment of credit risk and the estimation of ECL are required to be unbiased, probability-weighted and should incorporate all available information relevant to the assessment, including information about past events, current conditions and reasonable and supportable forecasts of economic conditions at the reporting date. The forward-looking aspect of IFRS 9 requires considerable judgement as to how changes in economic factors affect ECLs. ECL charges in respect of customer receivables are recognised in the Consolidated Income Statement within administrative expenses. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 219 --- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED # I. ACCOUNTING POLICIES (CONTINUED) # Inventories Inventories are stated at the lower of cost and net realisable value. Cost includes all costs incurred in bringing each product to its present location and condition. Raw materials, consumables and goods for resale are recognised on an average cost basis. Work in progress comprises goods that are not yet available for resale due to repair or certification requirements. Raw materials consist of spare parts utilised in the repair process. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. # Cash and cash equivalents In the Consolidated Balance Sheet, cash and cash equivalents includes cash in hand, cash in transit, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Cash in transit largely comprises amounts receivable on credit cards where the transaction has been authorised but the funds have yet to clear the bank. These balances are considered to be highly liquid, with minimal risk of default, and are typically received in less than three days. Restricted cash, included within cash and cash equivalents, is defined as cash controlled by the Group but which is not freely usable by the Group in day-to-day operations. # Provisions Provisions are recognised when: - The Group has a present legal or constructive obligation as a result of past events - It is probable that an outflow of resources will be required to settle the obligation - The amount has been reliably estimated Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as an interest expense. # Post-employment benefit obligations The Group operates various post-employment schemes, including both defined benefit schemes and defined contribution pension plans. Typically, defined benefit schemes define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The amount recognised in the Consolidated Balance Sheet in respect of the defined benefit pension scheme is the present value of the defined benefit obligation at the end of the reporting period less the fair value of scheme assets. The defined benefit obligation is calculated by a full yield-curve independent actuarial valuation. The present value of the defined benefit amount is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. The current service cost of the defined benefit scheme, recognised in the Consolidated Income Statement in employee benefit expense, reflects the increase in the defined benefit obligation resulting from employee service in the current period, benefit changes, curtailments and settlements. Past-service costs are recognised immediately in the Consolidated Income Statement. The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of scheme assets. This cost is included in employee benefit expense in the Consolidated Income Statement. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited in other comprehensive income in the period in which they arise. Where the Group has an unconditional right to a refund, it recognises an asset measured as the amount of the surplus at the balance sheet date that it has a right to receive as a refund. The surplus in the scheme is recognised as on an ultimate wind-up when there are no longer any remaining members, any surplus would be returned to the Group, which has the power to prevent the surplus being used for other purposes in advance of this event. For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense when they are due. # Financial instruments – initial recognition and subsequent measurement A financial instrument is any contract that gives rise to a financial asset in one entity and a financial liability or equity instrument in another entity. The Group does not hold any derivative instruments in either the current or prior period. # Financial assets # Initial recognition and measurement Financial assets are classified at initial recognition, and subsequently measured at amortised cost, Fair Value through Other Comprehensive Income (FVOCI) or Fair Value through Profit or Loss (FVPL). The classification is based on two criteria: - The Group's business model for managing the assets; and - Whether the instruments' contractual cash flows represent 'Solely Payments of Principal and Interest' on the principal amount outstanding (the SPPI criterion) A summary of the Group's financial assets is as follows: | Financial assets | Classification under IFRS 9 | | --- | --- | | Trade and other receivables (excluding prepayments) | Amortised cost – held to collect as business model and SPPI met | | Cash and short-term deposits | Amortised cost | Under IFRS 9 the Group initially measures a financial asset at its fair value plus directly attributable transaction costs, unless the asset is classified as FVPL. Transactional costs of financial assets carried at FVPL are expensed in the Consolidated Income Statement. # Subsequent measurement Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest rate (EIR) method. The amortised cost is reduced by impairment losses. Interest income, impairment or gain or loss on derecognition are recognised in profit or loss. # Derecognition A financial asset is derecognised primarily when: - The rights to receive cash flows from the asset have expired; or - The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either a) the Group has transferred substantially all the risks and rewards of the asset, or b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset # Impairment The Group recognises an allowance for ECLs for all debt instruments not held at FVPL. The most significant financial assets of the Group are its trade receivables. ECLs are calculated in accordance with the accounting policies set out above. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2016 220 --- ## Financial liabilities ### Initial recognition and measurement The Group has classified its financial liabilities as follows: | Financial liabilities | Classification under IFRS 9 | | --- | --- | | Interest-bearing loans and borrowings | Amortised cost | | Trade and other payables (excluding accrued income) | Amortised cost | All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. ### Subsequent measurement A summary of the subsequent measurement of financial liabilities is set out below: | Financial liabilities at FVPL | Subsequently measured at fair value. Gains and losses are recognised in the Consolidated Income Statement | | --- | --- | | Interest-bearing loans and borrowings | Subsequently measured at amortised cost using the EIR method. The EIR amortisation is included in finance costs in the Income Statement | | Trade and other payables (excluding accrued income) | Subsequently measured at amortised cost | ### Derecognition A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Consolidated Income Statement. ### Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the Consolidated Balance Sheet if there is a currently enforceable legal right to offset the recognised amounts and there is an intention and ability to settle on a net basis, to realise the assets and settle the liabilities simultaneously. ### Leases The Group's lease portfolio is principally comprised of property leases in relation to Watches of Switzerland, Mappin & Webb, Goldsmiths, Mayors, Betteridge and Deutsch & Deutsch showrooms, mono-brand boutiques and Support Centres. The leases typically run for terms between five and 20 years and may include break clauses or options to renew beyond the non-cancellable periods. The majority of the Group's lease payments are subject to market review, usually every five years, with a number of leases having annual increases dependent on economic indices. Some lease agreements include rental payments which are contingent on the turnover of the property to which they relate. These payments are excluded from the calculation of the lease liabilities under IFRS 16 'Leases'. ### Definition of a lease The Group assesses whether a contract is or contains a lease based on the definition of a lease under IFRS 16. A contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease and non-lease component on the basis of their relative standalone prices. ## Lease liability – initial recognition The Group recognises right-of-use assets and lease liabilities at the lease commencement date. The lease liabilities are initially measured at the present value of the lease payments that are not yet paid at the commencement date, less any incentives receivable, discounted using the determined incremental borrowing rate applicable to the lease. Lease payments in the measurement of the lease liability comprise: - Fixed lease payments (including in-substance fixed payments), less any lease incentives - Variable lease payments such as those that depend on an index or rate (such as RPI), initially measured using the index or rate at the commencement date; and - Penalty payments for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease The Group discounts lease payments to their present value, using its Incremental Borrowing Rate (IBR) at the lease commencement date. IBR applied to each lease is determined by taking into account: - The risk-free rate based on country-specific swap markets - A credit risk adjustment based on country-specific corporate indices; and - A Group specific adjustment to reflect the Group's specific borrowing conditions ## Lease liability – subsequent measurement Lease liabilities are subsequently measured at amortised cost and are increased to reflect interest on the lease liability (using the effective interest method) and decreased by the lease payments made. ## Lease liability – remeasurement Lease liabilities are remeasured when there is a change in future lease payments arising from a change in an index or market rental review, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a renewal option is reasonably certain to be exercised or a break clause is reasonably certain to be exercised. When the lease liability is remeasured, an equivalent adjustment is made to the right-of-use asset, unless its carrying amount is reduced to £nil, in which case any remaining amount is recognised in profit or loss. The Group has applied judgement to determine the lease term for those lease contracts that include a renewal or break option. The assessment of whether the Group is reasonably certain to exercise a renewal option or reasonably certain not to exercise a break option significantly impacts the value of lease liabilities and right-of-use assets recognised in the Consolidated Balance Sheet and the Consolidated Income Statement. ## Right-of-use assets – initial recognition Right-of-use assets are initially measured at cost, which is an amount equal to the corresponding lease liabilities adjusted for any lease payments made at or before the commencement date, dilapidation provisions required, less any lease incentives received. The Group has elected to apply the exemption for short-term leases (leases with a term of less than one year) and low-value assets under IFRS 16, as such not recognising a right-of-use asset and lease liability in the Consolidated Balance Sheet, but recognising lease payments associated with those leases as an expense on a straight-line basis over the lease term. Where the Group has an obligation for costs to restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37 'Provisions, contingent liabilities and contingent assets'. The estimated costs are included in the related right-of-use asset. Initial direct costs (lease acquisition costs), incurred subsequently to the initial date of application, have been included within the right-of-use asset. ## Right-of-use assets – subsequent measurement Right-of-use assets are subsequently measured at cost less any accumulated depreciation and impairment losses, adjusted for certain remeasurements of the lease liabilities. Depreciation is calculated on a straight-line basis over the expected useful economic life of a lease which is taken as the lease term. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 221 --- # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED # I. ACCOUNTING POLICIES (CONTINUED) # NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS The following amendment was adopted by the Group for the 53-week period ended 3 May 2026: – Lack of exchangeability – Amendments to IAS 21 This had no material impact on the Group. The following standards, amendments, and interpretations have been issued but are not yet effective for the period ended on 3 May 2026. The Group has not early adopted the underlisted standards, amendments, and interpretations in preparing the Consolidated Financial Statements as it plans to adopt them at the effective date: – Amendments to IFRS 9 and IFRS 7 'Classification and Measurement of Financial Instruments' issued in May 2024 and effective for accounting period starting from 1 January 2026; – Annual Improvements to IFRS Accounting Standards – Volume 11 issued in July 2024 and effective for accounting period starting from 1 January 2026; – IFRS 18 'Presentation and disclosure in financial statements' issued in April 2024 and effective for accounting period starting from 1 January 2027; and – Amendments to IAS 21 'Translation to a Hyperinflationary Presentation Currency' issued in November 2025 and effective for accounting period starting from 1 January 2027. The Group is assessing the impact IFRS 18 will have on the presentation and disclosure in the Group's financial statements. The Group is not expecting the other accounting amendments listed above to have a material impact on the Group's financial statements. # Significant accounting estimates, assumptions and judgements The preparation of consolidated financial information requires the Group to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are reasonable under the circumstances. Actual results may differ from these estimates. # Significant estimates and assumptions Estimates and underlying assumptions are reviewed by management on an ongoing basis, with revisions recognised in the period in which the estimates are revised and in any future period affected. The areas involving significant risk resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial period are as follows: # Net realisable value of inventories Inventories are stated at the lower of cost and net realisable value, on a weighted average cost basis. Provisions are recognised where the net realisable value is assessed to be lower than cost. The calculation of this provision requires estimation of the eventual sales price and sell-through of goods to customers in the future. The inventory provision held at the year end was £5.7 million (2025: £5.8 million). A 20% reduction in the sell-through of slow moving stock would impact the net realisable value by £3.6 million. # Impairment of property, plant and equipment and right-of-use assets Property, plant and equipment and right-of-use assets are reviewed for impairment if events or changes in circumstances indicate that the carrying amount may not be recoverable. For the impairment test, the value-in-use method requires the Group to determine appropriate assumptions (which are sources of estimation uncertainty) in relation to the cash flow projections over the strategic plan period, the long-term growth rate to be applied beyond this period and the risk-adjusted pre-tax discount rate used to discount those cash flows. The key assumptions relate to sales growth rates and discount rates used to discount the cash flows. Climate risk and near-term environmental actions that the Group is taking have been considered in future cash flows used in the impairment review. This includes unavoidable future costs such as price increases, together with the cost of mitigating climate risks, and consideration of quantified climate-related risks on future cash flows. Showroom-related property, plant and equipment and right-of-use assets are tested for impairment at a showroom-by-showroom level, including an allocation of overheads related to showroom operations. Sensitivity of the key assumptions in relation to impairment is included in note 12. # Discount rates (IFRS 16) The discount rate used to calculate the lease liability is the rate implicit in the lease, if it can be readily determined, or the lessee's incremental borrowing rate if not. Management uses the rate implicit in the lease in relation to the Group's 'Other' leases and the lessee's incremental borrowing rate for all property leases. Incremental borrowing rates are determined on entering a lease and depend on the term, country, currency and start date of the lease. The incremental borrowing rate used is calculated based on a series of inputs including: – The risk-free rate based on country-specific swap markets – A credit risk adjustment based on country-specific corporate indices; and – A Group-specific adjustment to reflect the Group's specific borrowing conditions As a result, reflecting the breadth of the Group's lease portfolio, judgements on the lease terms and the international spread of the portfolio, there are a large number of discount rates applied to the leases within the range of 2.1% to 7.7%. # Significant judgements The following are the critical judgements, apart from those involving estimations, that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the Consolidated Financial Statements: # Classification of exceptional items and presentation of non-GAAP measures The Directors exercise their judgement in the classification of certain items as exceptional and outside the Group's underlying results. The determination of whether an item should be separately disclosed as an exceptional item, non-underlying or non-trading requires judgement on its size, nature or expected infrequency, as well as whether it provides clarity on the Group's underlying trading performance. In exercising this judgement, the Directors take appropriate regard of IAS 1 'Presentation of financial statements' as well as guidance from the Financial Reporting Council and the European Securities Market Authority on the reporting of exceptional items and APMs. The overall goal of the Directors is to present the Group's underlying performance without distortion from one-off or non-trading events regardless of whether they are favourable or unfavourable to the underlying result. Further details on exceptional items are provided in note 4. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 222 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS ## 2. SEGMENT REPORTING The key Group performance measures are Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation (Adjusted EBITDA) and Adjusted Earnings Before Interest and Tax (Adjusted EBIT), both shown pre-exceptional items, as detailed below. The segment profit/loss is disclosed on a pre-IFRS 16 basis reflecting how results are reported to the Chief Operating Decision Makers (CODMs) and how they are measured for the purposes of covenant testing. Both Adjusted EBITDA and Adjusted EBIT are APMs and these measures provide stakeholders with additional useful information to assess the year-on-year trading performance of the Group but should not be considered in isolation of statutory measures. Adjusted EBITDA represents profit for the period before finance costs, finance income, taxation, depreciation, amortisation, and exceptional items presented in the Group's Consolidated Income Statement (consisting of exceptional cost of sales, exceptional administrative expenses net of impairment reversal and exceptional finance costs) on a pre-IFRS 16 basis. UK and Europe operating segments are aggregated into one reporting segment, which is reflective of the management structure in place and meets the aggregation criteria of IFRS 8. As a result of the acquisition of Roberto Coin Inc. in May 2024 and the continued growth of the wholesale business in the period, the Group's organisational structure and internal reporting to the CODM have changed. US retail and US wholesale, previously aggregated into the US reporting segment, have been shown separately. All US direct-to-consumer sales, including ecommerce, are now reported through US retail. The comparative segmental disclosures have been re-presented to allow for comparison. | | 53 week period ended 3 May 2026 | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | UK and Europe £m | US retail £m | US wholesale £m | Corporate £m | Eliminations £m | Total £m | | Revenue | | | | | | | | External customers | 900.7 | 810.5 | 116.7 | – | – | 1,827.9 | | Inter-segment | – | – | 10.2 | – | (10.2) | – | | **Total revenue** | **900.7** | **810.5** | **126.9** | **–** | **(10.2)** | **1,827.9** | | Cost of sales | (585.4) | (528.0) | (73.4) | – | 10.2 | (1,176.6) | | **Net margin** | **315.3** | **282.5** | **53.5** | **–** | **–** | **651.3** | | Less: | | | | | | | | Showroom costs | (173.0) | (140.7) | – | – | – | (313.7) | | Overheads | (48.3) | (48.1) | (27.5) | (5.5) | – | (129.4) | | Showroom opening and closing costs | (3.1) | (2.9) | – | – | – | (6.0) | | Share of result of joint venture and associates | – | – | – | – | – | – | | **Adjusted EBITDA** | **90.9** | **90.8** | **26.0** | **(5.5)** | **–** | **202.2** | | Depreciation, amortisation and loss on disposal of assets | (25.0) | (19.7) | (1.0) | (1.7) | – | (47.4) | | **Segment profit/(loss)*** | **65.9** | **71.1** | **25.0** | **(7.2)** | **–** | **154.8** | | Impact of IFRS 16 (excluding interest on leases) | | | | | | 24.0 | | Net finance costs | | | | | | (36.5) | | Exceptional impairment of assets (note 4) | | | | | | (9.9) | | Exceptional reversal of impairment of assets (note 4) | | | | | | 2.3 | | Exceptional other administrative expenses (note 4) | | | | | | (1.2) | | **Profit before taxation for the financial period** | | | | | | **133.5** | * Segment profit/(loss) is defined as being Earnings Before Interest, Tax, exceptional items and IFRS 16 adjustments (Adjusted EBIT) 223 --- # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED # 2. SEGMENT REPORTING (CONTINUED) | | 52 week period ended 27 April 2025 | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | UK and Europe £m | US retail £m | US wholesale^{1} £m | Corporate £m | Eliminations £m | Total £m | | Revenue | | | | | | | | External customers | 865.9 | 680.7 | 104.9 | – | – | 1,651.5 | | Inter-segment | – | – | 4.9 | – | (4.9) | – | | **Total revenue** | **865.9** | **680.7** | **109.8** | **–** | **(4.9)** | **1,651.5** | | Cost of sales | (553.9) | (438.6) | (65.3) | – | 4.9 | (1,052.9) | | **Net margin** | **312.0** | **242.1** | **44.5** | **–** | **–** | **598.6** | | Less: | | | | | | | | Showroom costs | (170.3) | (122.4) | – | – | – | (292.7) | | Overheads | (44.0) | (38.4) | (20.2) | (3.9) | – | (106.5) | | Showroom opening and closing costs | (1.6) | (5.3) | – | – | – | (6.9) | | Share of loss of joint venture and associates | (0.2) | – | – | – | – | (0.2) | | **Adjusted EBITDA** | **95.9** | **76.0** | **24.3** | **(3.9)** | **–** | **192.3** | | Depreciation, amortisation, impairment and loss on disposal of assets | (25.9) | (14.8) | (0.4) | (1.5) | – | (42.6) | | **Segment profit/(loss)*** | **70.0** | **61.2** | **23.9** | **(5.4)** | **–** | **149.7** | | Impact of IFRS 16 (excluding interest on leases) | | | | | | 19.7 | | Net finance costs | | | | | | (35.8) | | Exceptional cost of sales (note 4) | | | | | | (2.0) | | Exceptional impairment of assets (note 4) | | | | | | (46.5) | | Exceptional other administrative expenses (note 4) | | | | | | (7.0) | | Exceptional finance costs (note 4) | | | | | | (2.2) | | **Profit before taxation for the financial period** | | | | | | **75.9** | 1 US retail and US wholesale, previously aggregated into the US reporting segment, have been shown separately to align with the latest internal reporting to the CODM. Disclosures have been re-presented to show all US direct-to-consumer sales, including ecommerce, within the US retail segment THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 224 --- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED # 23. FINANCIAL INSTRUMENTS (CONTINUED) # Interest rate risk – sensitivity The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. The analysis has been prepared using the assumptions that: – For floating rate assets and liabilities, the amount of the asset or liability outstanding at the balance sheet date is assumed to have been outstanding for the whole period – Fixed rate financial instruments that are carried at amortised cost are not subject to interest rate risk for the purpose of this analysis. With all other variables held constant, the Group's profit before tax is affected through the impact on floating rate borrowings, as follows: | | 53 week period ended 3 May 2026 £m | 52 week period ended 27 April 2025 £m | | --- | --- | --- | | Interest rate increase of 0.5% | (0.6) | (1.0) | | Interest rate decrease of 0.5% | 0.6 | 1.0 | # Credit risk Credit risk arises from cash and cash equivalents, credit sales and deposits with banks. Credit risk related to the use of treasury instruments is managed on a Group basis. This risk arises from transactions with banks, such as those involving cash and cash equivalents and deposits. To reduce the credit risk, the Group has concentrated its main activities with a group of banks that have secure credit ratings. For each bank, individual risk limits are set based on its financial position, credit ratings, past experience and other factors. The utilisation of credit limits is regularly monitored. Management continually reviews specific balances for potential indicators of impairment. In the instance where an indicator is identified, management will determine overall recovery from a legal perspective and provide for any irrecoverable amounts. Credit risk also arises from the recoverability of the Group's trade and other receivables. Trade and other receivables are only written off when the Group has exhausted all options to recover the amounts due and provided for in full when there is no reasonable expectation of recovery, which is the Group's definition of default. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of the debtor to engage in a repayment plan with the Group and a failure to make contractual payments. An ECL provision is then calculated on the remaining trade and other receivables. The ageing analysis of the trade receivables is as follows: | | 3 May 2026 £m | 27 April 2025 £m | | --- | --- | --- | | Not past due | 25.5 | 22.8 | | Less than one month past due | 1.1 | 3.9 | | One to two months past due | 0.5 | 2.0 | | More than two months past due | 1.2 | 3.7 | | **Total** | **28.3** | **32.4** | The maximum exposure to credit risk at the reporting date is the carrying value of each class of asset. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 250 --- STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS # **Currency risk** The exposure to currency risk is considered below: | | 3 May 2026 | | | | | --- | --- | --- | --- | --- | | | Sterling £m | US Dollar £m | Other £m | Total £m | | **FINANCIAL ASSETS** | | | | | | Trade and other receivables | 12.5 | 23.5 | 1.3 | 37.3 | | Cash and cash equivalents | 36.6 | 28.3 | 0.2 | 65.1 | | **Total financial assets** | **49.1** | **51.8** | **1.5** | **102.4** | | **FINANCIAL LIABILITIES** | | | | | | Term loan | 0.5 | (92.1) | – | (91.6) | | Multicurrency revolving loan facility | (28.9) | – | – | (28.9) | | Trade and other payables | (88.4) | (105.2) | (12.5) | (206.1) | | Lease liabilities | (235.7) | (190.5) | (1.4) | (427.6) | | **Total financial liabilities** | **(352.5)** | **(387.8)** | **(13.9)** | **(754.2)** | | | 27 April 2025 | | | | | --- | --- | --- | --- | --- | | | Sterling £m | US Dollar £m | Other £m | Total £m | | **FINANCIAL ASSETS** | | | | | | Trade and other receivables | 18.5 | 32.9 | – | 51.4 | | Cash and cash equivalents | 61.1 | 37.4 | 0.4 | 98.9 | | **Total financial assets** | **79.6** | **70.3** | **0.4** | **150.3** | | **FINANCIAL LIABILITIES** | | | | | | Term loan | 0.7 | (93.9) | – | (93.2) | | Multicurrency revolving loan facility | (88.4) | (11.2) | – | (99.6) | | Trade and other payables | (106.7) | (104.8) | (4.6) | (216.1) | | Lease liabilities | (265.5) | (186.5) | (2.6) | (454.6) | | **Total financial liabilities** | **(459.9)** | **(396.4)** | **(7.2)** | **(863.5)** | # **Currency risk sensitivity** The following table demonstrates the sensitivity to a change in the US Dollar exchange rate, with all other variables held constant, and the impact upon the Group's profit after tax assuming that none of the US Dollar exposures are used as hedging instruments. Sensitivities have not been performed for any other currencies as the Group has no significant exposure in any other currency. | | (Increase)/ decrease in rate £m | Effect on profit after tax 53 week period ended 3 May 2026 £m | Effect on profit after tax 52 week period ended 27 April 2025 £m | | --- | --- | --- | --- | | US Dollar | (5%) | (2.7) | (1.9) | | US Dollar | 5% | 3.0 | 2.1 | # **Capital risk** The capital structure of the Group consists of debt, as analysed in note 19, and equity attributable to the equity holders of the Parent Company, comprising issued capital reserves and retained earnings as shown in the Consolidated Statement of Changes in Equity. The Group manages its capital with the objective that all entities within the Group continue as going concerns while maintaining an efficient structure to minimise the cost of capital. The Directors carefully monitor the Group's long-term borrowings including the ability to service debt and long-term forecast covenant compliance. The Group takes a disciplined approach to capital allocation with the objective to deliver long-term sustainable earnings growth whilst retaining financial capability to invest in developing our business and to execute our strategic priorities. The Group is well positioned to continue investing in elevating and expanding its existing showroom portfolio and to make complementary acquisitions which meet strict investment criteria and advance the Group's strategic objectives. 251 --- # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ### 24. RELATED PARTY TRANSACTIONS #### Key management personnel compensation Total compensation of five (2025: four) key management personnel in the period to 3 May 2026 amounted to £4.3 million (2025: £2.1 million). Compensation includes salaries and other short-term employee benefits, post-employment benefits and other long-term benefits. Key management are eligible to receive discounts on goods purchased from the Group's trading companies. Such discounts are in line with discounts offered to all staff employed by Group companies. In addition to their salaries, the Group also contributes to post-employment defined contribution plans unless individuals choose to waive these employer contributions. Key management are those individuals who have authority and responsibility for planning, directing and controlling the activities of the Group. | | 53 week period ended 3 May 2026 £m | 52 week period ended 27 April 2025 £m | | --- | --- | --- | | Short-term employment benefits – fixed pay | 1.7 | 1.5 | | Short-term employment benefits – variable pay | 1.8 | 0.3 | | Share-based payments | 0.8 | 0.3 | | **Total** | **4.3** | **2.1** | #### Other items to note Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. A loan of £2.4 million (2025: £2.4 million) is receivable from Audemars Piguet (Manchester) Limited in which the Group holds a 40% interest. The Group earned interest income on the loan during the period of £0.1 million (2025: £0.1 million). ### 25. BUSINESS COMBINATIONS #### Deutsch & Deutsch On 22 January 2026, the Group, through a newly formed holding company Deutsch & Deutsch (WOS) LLC, acquired the trade and assets of four Deutsch & Deutsch showrooms. As consideration, Deutsch & Deutsch (WOS) LLC paid £32.0 million as cash consideration and issued equity units in Deutsch & Deutsch (WOS) LLC representing 12.19% NCI to the Sellers (Deutsch's of McAllen, Inc., Deutsch Bros of El Paso, Ltd., Deutsch's of Victoria II, LLC, and Relojs II, Ltd.). The acquisition further advances the Group's expansion strategy. The business contributed revenue of £16.4 million from the 22 January 2026 acquisition date to 3 May 2026. The profit before tax contribution was £2.4 million in this initial start-up period. The following table summarises the consideration paid for the acquisition, and the provisional fair value of assets and liabilities acquired at the acquisition date: | | £m | | --- | --- | | **Total cash consideration** | **32.0** | | *Provisional fair value of net assets acquired* | | | Inventories | 8.7 | | Trade and other receivables | 0.3 | | Intangibles – brand | 3.0 | | Property, plant and equipment | 6.5 | | Trade and other payables | (2.8) | | Right-of-use assets | 9.0 | | Lease liabilities | (9.0) | | Deferred tax asset | 2.3 | | **Total identifiable net assets** | **18.0** | | Non-controlling interest measured using the Proportionate Share method | (1.9) | | Goodwill | 15.9 | | **Total assets acquired** | **32.0** | A deferred amount of £2.2 million is being held to cover the indemnification of certain acquisition balances for two years from the acquisition date. The goodwill recognised is attributable to the profitability of the acquired showrooms and is expected to be deductible for tax purposes. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 252 --- The Group has elected to measure the non-controlling interest using the Proportionate Share method giving a £1.9 million non-controlling interest valuation. The Group has granted put options to the non-controlling interests of Deutsch & Deutsch (WOS) LLC, resulting in the derecognition of the non-controlling interest at the reporting date and the recognition of a purchase commitment liability amounting to £8.9 million (see note 17). The amount recognised in the Consolidated Statement of Changes in Equity for the purchase commitment as at 3 May 2026 is £9.0 million following a £0.1 million foreign exchange movement. The Group measured the acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition. The right-of-use assets were measured at an amount equal to the lease liabilities, with consideration given to the terms of the lease relative to market terms. If the business combination had taken place at the beginning of FY26, the contribution to the Group's revenue would have been £56.7 million and the contribution to profit before tax would have been £7.6 million. Acquisition-related costs have been charged to exceptional items in the Consolidated Income Statement for the 53-week period ended 3 May 2026, as disclosed in note 4 to these Consolidated Financial Statements. The values stated above are the initial assessment of the fair values of assets and liabilities on acquisition. These will be finalised within 12 months of the acquisition date. #### **Acquisitions completed in the prior 52 week period to 27 April 2025** ##### **Roberto Coin Inc.** On 8 May 2024, the Group signed and completed the acquisition of the entire share capital of Roberto Coin Inc., an associate company of Roberto Coin S.p.A. from Roberto Coin S.p.A., Peter Webster, Co-Founder and President of Roberto Coin Inc., and Pilar Coin. The acquisition completed for a total cash consideration of £106.2 million. Contingent consideration of £7.4 million was paid in the period, in addition to the £2.1 million net working capital true-up payment. Luxury branded jewellery is a core pillar of the Group's growth strategy and the acquisition will significantly enhance our strategic positioning in the luxury branded jewellery market on a per capital basis. The following table summarises the consideration paid for the acquisition net of £4.0 million of cash acquired, and the fair value of assets acquired at the acquisition date: | | £m | | --- | --- | | **Total cash consideration net of cash acquired** | **106.2** | | *Fair value of net assets acquired* | | | Inventories | 53.9 | | Trade and other receivables | 13.2 | | Intangibles – licence with indefinite useful life | 57.2 | | Intangibles – brand | 0.5 | | Property, plant and equipment | 1.0 | | Trade and other payables | (32.3) | | Provisions | (0.4) | | Right-of-use assets | 1.9 | | Lease liabilities | (1.9) | | Deferred tax liability | (15.5) | | **Total identifiable net assets** | **77.6** | | Goodwill | 28.6 | | **Total assets acquired** | **106.2** | At the prior period end an amount of £8.2 million, from the initial consideration paid, was held with a third-party on retention and reported within debtors. The full amount was paid in the period. The goodwill recognised was attributable to the profitability of the acquired business and is deductible for tax purposes. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 253 --- # NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED # 25. BUSINESS COMBINATIONS (CONTINUED) Hodinkee, Inc. On 3 October 2024, the Group signed and completed the acquisition of the trade and assets of Hodinkee, Inc., a digital editorial content provider for luxury watch enthusiasts. As part of the transaction, the entire share capital of Hodinkee Insurance Holdings Inc. was acquired to retain the licence to sell insurance. The acquisition completed for a total cash consideration of £10.7 million. The acquisition allows the Group to leverage existing growth opportunities by growing sector leadership online, and also further enhances the Group's ability to capture market share, particularly in the fast growing US market. The following table summarises the consideration paid for the acquisition, and the fair value of assets acquired at the acquisition date: | | £m | | --- | --- | | **Total cash consideration net of cash acquired** | **10.7** | | *Fair value of net assets acquired* | | | Inventories | 0.2 | | Trade and other receivables | 0.1 | | Intangibles – brand | 2.9 | | Trade and other payables | (1.4) | | **Total identifiable net assets** | **1.8** | | Goodwill | 8.9 | | **Total assets acquired** | **10.7** | At the prior period end an amount of £0.6 million, from the initial consideration paid, was held with a third-party on retention and reported within debtors. As at 3 May 2026 an amount of £0.4 million continues to be held. The goodwill recognised was attributable to the profitability of the acquired business and is deductible for tax purposes. # 26. CONTINGENT LIABILITIES From time to time, the Group may be subject to complaints and litigation from its clients, employees, suppliers and other third parties. Such complaints and litigation may result in damages or other losses, which may not be covered by the Group's insurance policies or which may exceed any existing coverage. These are not expected to result in a material liability to the Group. # 27. POST-BALANCE SHEET EVENTS No post-balance sheet events have been identified. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 254 --- # COMPANY BALANCE SHEET AS AT 3 MAY 2026 | | Note | 3 May 2026 £m | 27 April 2025 £m | | --- | --- | --- | --- | | **FIXED ASSETS** | | | | | Investments | C2 | 471.9 | 471.9 | | **CURRENT ASSETS** | | | | | Debtors: amounts receivable within one year | C3 | 1.0 | 0.2 | | **CURRENT LIABILITIES** | | | | | Creditors: amounts falling due within one year | C4 | – | (13.7) | | **Net current assets/(liabilities)** | | **1.0** | **(13.5)** | | **Net assets** | | **472.9** | **458.4** | | **EQUITY** | | | | | Share capital | C6 | 2.9 | 3.0 | | Share premium | C6 | 147.1 | 147.1 | | Capital redemption reserve | C6 | 0.1 | – | | Other reserves | C6 | (11.6) | (13.3) | | Retained earnings | | 334.4 | 321.6 | | **Total equity** | | **472.9** | **458.4** | The Company's profit after tax was £12.7 million (2025: £9.4 million). The profit in year is a result of a dividend received which allowed repayment of management recharges from subsidiary entities, and enabled the purchase of shares in respect of the share buyback. The Financial Statements were approved and authorised for issue by the Board and were signed on its behalf by: **L A ROMBERG** **CHIEF FINANCIAL OFFICER** Date: 13 July 2026 The notes on pages 257 to 260 form part of these Financial Statements. Company number: 11838443 STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 255 --- # COMPANY STATEMENT OF CHANGES IN EQUITY AS AT 3 MAY 2026 | | Share capital £m | Share premium £m | Capital redemption reserve £m | Other reserves £m | Retained earnings £m | Total equity attributable to owners £m | | --- | --- | --- | --- | --- | --- | --- | | **Balance at 28 April 2024** | **3.0** | **147.1** | **–** | **(23.4)** | **345.5** | **472.2** | | Profit for the financial period | – | – | – | – | 9.4 | 9.4 | | Purchase of own shares for cancellation | – | – | – | (12.1) | – | (12.1) | | Own shares cancelled | – | – | – | 11.3 | (11.3) | – | | Committed share buyback | – | – | – | – | (12.9) | (12.9) | | Share-based payments charge | – | – | – | – | 1.8 | 1.8 | | Share-based payments exercised | – | – | – | 10.9 | (10.9) | – | | **Balance at 27 April 2025** | **3.0** | **147.1** | **–** | **(13.3)** | **321.6** | **458.4** | | Profit for the financial period | – | – | – | – | 12.7 | 12.7 | | Purchase of own shares for cancellation | – | – | – | (12.9) | – | (12.9) | | Own shares cancelled | (0.1) | – | 0.1 | 13.8 | (0.9) | 12.9 | | Share-based payments charge | – | – | – | – | 1.8 | 1.8 | | Share-based payments exercised | – | – | – | 0.8 | (0.8) | – | | **Balance at 3 May 2026** | **2.9** | **147.1** | **0.1** | **(11.6)** | **334.4** | **472.9** | THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 256 --- NOTES TO THE COMPANY FINANCIAL STATEMENTS ## C1. GENERAL INFORMATION Watches of Switzerland Group PLC (the 'Company') is a public limited company, limited by shares, which is listed on the London Stock Exchange and incorporated and domiciled in England and Wales. The registered number is 11838443 and the address of the registered office is Aurum House, 2 Elland Road, Braunstone, Leicester, LE3 1TT. These Financial Statements present information about the Company as an individual undertaking and not about its Group. The Financial Statements of Watches of Switzerland Group PLC have been prepared in compliance with United Kingdom Accounting Standards, including Financial Reporting Standard 102, 'The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland' (FRS 102) and the Companies Act 2006. The Financial Statements are presented in Pounds Sterling (£), which is the Group's presentational currency, and are shown in £millions to one decimal place. ### Accounting policies The accounting policies set out in the notes below have been applied in preparing the Financial Statements for the 53-week period ended 3 May 2026 and the comparative information presented in these Financial Statements for the 52-week period ended 27 April 2025. The Company is included within the Consolidated Financial Statements of Watches of Switzerland Group PLC. The Consolidated Financial Statements of Watches of Switzerland Group PLC are prepared in accordance with IFRS and are publicly available. In these Financial Statements, the Company is considered to be a qualifying entity (for the purposes of this FRS) and has applied the exemptions available under FRS 102 in respect of the following disclosures: - The requirement to prepare a statement of cash flows As permitted by Section 408 of the Companies Act 2006, the Income Statement of the Company is not presented as part of the Financial Statements. The Company's accounting policies are the same as those set out in note 1 of the Consolidated Financial Statements, unless noted below. ### Investments Investments in subsidiaries are measured at cost less accumulated impairment. Where merger relief is applicable, the cost of the investment in a subsidiary undertaking is measured at the nominal value of the shares issued together with the fair value of any additional consideration paid. ### Impairment The carrying values of non-financial assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any impairment loss arises, the asset is adjusted to its estimated recoverable amount and the difference is recognised in the Income Statement. ### Trade and other debtors/creditors Trade and other debtors are recognised initially at transaction price plus attributable transaction costs. Trade and other creditors are recognised initially at transaction price less attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method, less any impairment losses in the case of trade debtors. If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is measured at the present value of future payments discounted at a market rate of interest for a similar debt instrument. ### Share-based payments Some employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (equity-settled transactions). The fair value of the equity-settled awards is calculated at grant date using a Black-Scholes model. The resulting cost is charged in the Income Statement over the vesting period of the option or award and is regularly reviewed and adjusted for the expected and actual number of options or awards vesting. This applies to LTIP Awards, Deferred Share Bonus Schemes, Save as You Earn and Employee Stock Purchase Plan Awards, and Free Share Awards. Service and non-service performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group's best estimate of the number of equity instruments that will ultimately vest. No expense is recognised for awards that do not ultimately vest because of non-market performance and/or service conditions that have not been met. The social security contributions payable in connection with the grant of the share options is determined at each balance sheet date as a liability with the total cost recognised in the Income Statement over the vesting period. ### Own shares held Own shares represent the shares of Watches of Switzerland Group PLC that are held in an Employee Benefit Trust which has been set up for this purpose. The Company adopts a 'look-through' approach which, in substance, accounts for the Trust as an extension of the Company. Own shares are recorded at cost and are deducted from equity. ### Financial risk management The Company's financial risk is managed as part of the Group's strategy and policies as discussed in note 23 to the Consolidated Financial Statements. ### Company result for the period In accordance with the exemption allowed by Section 408(3) of the Companies Act 2006, the Company has not presented its own Income Statement or Statement of Comprehensive Income. ### Directors' remuneration and staff numbers The Company has no employees other than the Directors, who did not receive any remuneration for their services directly from the Company in either the current or preceding period. Refer to note 24 to the Group Financial Statements for Key Management Personnel compensation. ### External Auditor's remuneration The remuneration paid to the External Auditor in relation to the audit of the Company is disclosed in note 5 to the Consolidated Financial Statements. The fees for the audit of the Company's Financial Statements are borne by a subsidiary of the Company and are not recharged. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 257 --- # NOTES TO THE COMPANY FINANCIAL STATEMENTS ## C2. FIXED ASSET INVESTMENTS Our activities and interests are operated through subsidiaries, joint ventures and associates which are subject to the laws and regulations of many different jurisdictions. As at 3 May 2026: | Entity | Principal activity | Country of incorporation | Registered office | Type of share held by the Group | Proportion of ordinary shares held by Group companies | | --- | --- | --- | --- | --- | --- | | Jewel UK Midco Limited* | Intermediate holding company | England and Wales | Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT | Ordinary | 100% | | Jewel UK Bidco Limited | Intermediate holding company | England and Wales | Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT | Ordinary | 100% | | Watches of Switzerland Operations Limited | Intermediate holding company | England and Wales | Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT | Ordinary | 100% | | Aurum Acquisitions Limited | Intermediate holding company | England and Wales | Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT | Ordinary | 100% | | Watches of Switzerland Company Limited | Retailer | England and Wales | Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT | Ordinary | 100% | | Mappin & Webb Limited | Non-trading | England and Wales | Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT | Ordinary | 100% | | Goldsmiths Limited | Dormant | England and Wales | Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT | Ordinary | 100% | | WoS Dormant 1 Limited | Dormant | England and Wales | Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT | Ordinary | 100% | | WoS Dormant 2 Limited | Dormant | England and Wales | Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT | Ordinary | 100% | | Aurum Insurance (Guernsey) Limited** | Captive insurance company | Guernsey | Heritage Hall, Le Marchant Street, St Peter Port, Guernsey GY1 4JH | Ordinary | 100% | | Watches of Switzerland Limited | Dormant | England and Wales | Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT | Ordinary & redeemable preference | 100% | | Aurum Pension Trustees Limited | Pension trustee company | England and Wales | Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT | Ordinary | 100% | | Audemars Piguet (Manchester) Limited | Trading | England and Wales | Audemars Piguet (UK) Limited, 82-84 Grosvenor Street, 1st Floor, London W1K 3JZ | Ordinary | 40% | | Watches of Switzerland Group USA Inc | Holding company | USA | 3340 NW 53rd Street, Suite 402, Fort Lauderdale, Florida 33309 | Ordinary | 100% | | Watches of Switzerland (Nevada) LLC | Retailer | USA | 3340 NW 53rd Street, Suite 402, Fort Lauderdale, Florida 33309 | Ordinary | 100% | | Watches of Switzerland (A/S) LLC | Retailer | USA | 3340 NW 53rd Street, Suite 402, Fort Lauderdale, Florida 33309 | Ordinary | 100% | | Watches of Switzerland LLC | Retailer | USA | 3340 NW 53rd Street, Suite 402, Fort Lauderdale, Florida 33309 | Ordinary | 100% | | Mayors Jewelers LLC | Retailer | USA | 3340 NW 53rd Street, Suite 402, Fort Lauderdale, Florida 33309 | Ordinary | 100% | | Roberto Coin Inc. | Wholesaler and Retailer | USA | 579 5th Avenue, 17th Floor, New York 10017 | Ordinary | 100% | | Deutsch & Deutsch (WOS) LLC | Retailer | USA | 1209 Orange Street, Wilmington, Delaware 19801 | Ordinary | 87.81% | | RC Employee Services LLC | Non-trading | USA | 579 5th Avenue, 17th Floor, New York 10017 | Ordinary | 100% | | RBC 100 LLC | Non-trading | USA | 579 5th Avenue, 17th Floor, New York 10017 | Ordinary | 100% | | Hodinkee LLC | Holding | USA | 13450 W. Sunrise Blvd, Suite 500, Sunrise FL 33323 | Ordinary | 100% | | Hodinkee Insurance Holding Inc. | Holding | USA | 255 Centre Street, 4th Floor, New York 10013 | Ordinary | 100% | | Hodinkee Insurance Agency Inc. | Trading | USA | 255 Centre Street, 4th Floor, New York 10013 | Ordinary | 100% | | Mayors Jewelers of Florida LLC | Retailer | USA | 3340 NW 53rd Street, Suite 402, Fort Lauderdale, Florida 33309 | Ordinary | 100% | | Watches of Switzerland Group (Denmark) Aps | Non-trading | Denmark | Store Kongensgade 68, 1264 København K, Denmark | Ordinary | 100% | | WOSG (Germany) GmbH | Non-trading | Germany | Maximilianplatz 17, 80333, München, Germany | Ordinary | 100% | * Investment in Jewel UK Midco is directly held. All other investments are indirectly held ** Results of this company are fully taxable in the UK as a controlled foreign company THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 258 --- All subsidiary undertakings are included in the Consolidated Financial Statements. The proportion of the voting rights in the subsidiary undertakings held directly by the Company do not differ from the proportion of ordinary shares held. Investment in subsidiaries at the period end was as follows: | | 3 May 2026 £m | 27 April 2025 £m | | --- | --- | --- | | Investment in subsidiaries | **471.9** | 471.9 | Investments in Company undertakings are recorded at cost, which is the fair value of the consideration paid. ### C3. DEBTORS: AMOUNTS RECEIVABLE WITHIN ONE YEAR | | 3 May 2026 £m | 27 April 2025 £m | | --- | --- | --- | | Amounts owed by Group undertakings | **1.0** | 0.2 | Amounts owed by Group undertakings are unsecured and repayable on demand. ### C4. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR | | 3 May 2026 £m | 27 April 2025 £m | | --- | --- | --- | | Other creditors | – | (13.7) | At 27 April 2025, other creditors included £13.7 million in respect of the share buyback programme, which was settled in the current period. ### C5. FINANCIAL INSTRUMENTS | | 3 May 2026 £m | 28 April 2024 £m | | --- | --- | --- | | **FINANCIAL ASSETS – HELD AT AMORTISED COST** | | | | Amounts owed by Group undertakings | **1.0** | 0.2 | | **FINANCIAL LIABILITIES – HELD AT AMORTISED COST** | | | | Other creditors | – | (13.7) | STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 259 --- # NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED # C6. EQUITY | | Nominal value £ | Shares No. | Share capital £m | Share premium £m | Capital redemption reserve £m | Other reserves £m | Retained earnings £m | | --- | --- | --- | --- | --- | --- | --- | --- | | **As at 27 April 2025** | **0.0125** | **236,767,569** | **3.0** | **147.1** | **–** | **(13.3)** | **321.6** | | Profit for the financial period | – | – | – | – | – | – | 12.7 | | Purchase of own shares for cancellation | – | – | – | – | – | (12.9) | – | | Own shares cancelled | – | (3,465,947) | (0.1) | – | 0.1 | 13.8 | (0.9) | | Share-based payments charge | – | – | – | – | – | – | 1.8 | | Share-based payments exercised | – | – | – | – | – | 0.8 | (0.8) | | **As at 3 May 2026** | **0.0125** | **233,301,622** | **2.9** | **147.1** | **0.1** | **(11.6)** | **334.4** | # **Share capital** 233,301,622 ordinary shares of £0.0125 nominal value. # **Share premium** This reserve represents the amount of proceeds received for shares in excess of their nominal value of £0.0125 per share. # **Capital redemption reserve** The capital redemption reserve relates to the repurchase and cancellation of shares of the Company. During the year, the aggregate nominal value of shares cancelled and transferred to the capital redemption reserve was £43,324, resulting in a cumulative balance of £78,358 (2025: £35,034). # **Other reserves** Other reserves represent own shares purchased by the Company. These shares are held by an Employee Benefit Trust. The Company adopts a 'look-through' approach which, in substance, accounts for the Trust as an extension of the Company. Own shares are recorded at cost. At the year end the Company held 1,556,055 (2025: 1,889,509) own shares. During the period to 27 April 2025, the Company announced a £25.0 million share buyback programme, of which £12.1 million of shares had been purchased for cancellation and £12.9 million of share buyback was committed and accrued in retained earnings in the prior period. The outstanding £12.9 million share buyback was purchased, paid, and cancelled in the current period. £0.9 million of shares purchased in the prior period but paid and cancelled in the current period were transferred to retained earnings. # C7. RELATED PARTY TRANSACTIONS The Company has taken advantage of the exemptions under FRS 102.33 'Related Party Transactions' for wholly owned subsidiaries not to disclose intra-group transactions. # C8. SHARE-BASED PAYMENTS Details of the Company's share-based payments are disclosed within note 22 to the Consolidated Financial Statements. # C9. GUARANTEES At the date of signing the accounts, the Company has provided cross guarantee arrangements to Barclays Bank PLC, BNP Paribas London Branch, Citibank N.A. London Branch, Fifth Third Bank National Association, HSBC UK Bank PLC, Lloyds Bank PLC, National Westminster Bank PLC, Northern Bank Limited Trading as Danske Bank and Crédit Industriel et Commercial London Branch in respect of the obligations of certain fellow subsidiary undertakings in relation to the Group's lending facilities. # C10. POST-BALANCE SHEET EVENTS No post-balance sheet events have been identified. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 260 --- # GLOSSARY ## ALTERNATIVE PERFORMANCE MEASURES The Directors use Alternative Performance Measures (APMs) as they believe these measures provide additional useful information on the underlying trends, performance and position of the Group. These measures are used for performance analysis. The APMs are not defined by IFRS and therefore may not be directly comparable with other companies' APMs. These measures are not intended to be a substitute for, or superior to, IFRS measures. The majority of the Group's APMs are on a pre-IFRS 16 basis. This aligns with the management reporting used to inform business decisions, investment appraisals, incentive schemes and banking covenants. To ensure APMs are balanced between Financial and Non-Financial performance, and to align to current business segments, 4-wall EBITDA % has been removed. ### EBITDA, ADJUSTED EBITDA AND ADJUSTED EBIT MARGIN For each of these areas as defined in the Glossary, the Group shows the measures as a percentage of Group revenue. #### Why used Profitability as a percentage of Group revenue is shown to understand how effectively the Group is managing its cost base. #### Reconciliation to IFRS measures | £million | FY26 | FY25 | | --- | --- | --- | | **Revenue** | **1,827.9** | **1,651.5** | | Net margin | 651.3 | 598.6 | | | 35.6% | 36.3% | | EBITDA (unadjusted) | 208.2 | 199.4 | | | 11.4% | 12.1% | | Adjusted EBITDA | 202.2 | 192.3 | | | 11.1% | 11.6% | | Adjusted EBIT (segmental profit) | 154.8 | 149.7 | | | 8.5% | 9.1% | ### ADJUSTED EARNINGS BEFORE INTEREST AND TAX (ADJUSTED EBIT) Operating profit before exceptional items and IFRS 16 impact. #### Why used Measure of profitability that excludes one-off exceptional costs and IFRS 16 adjustments to allow for comparability between years. This measure was linked to management incentives in the financial year. #### Reconciliation to IFRS measures Reconciled in note 2 to the Consolidated Financial Statements. ### ADJUSTED EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (ADJUSTED EBITDA) EBITDA before exceptional items presented in the Group's Consolidated Income Statement. Shown on a continuing basis and before the impact of IFRS 16. #### Why used Measure of profitability that excludes one-off exceptional items and IFRS 16 adjustments to provide comparability between years. This measure was linked to management incentives in the financial year. #### Reconciliation to IFRS measures Reconciled within note 2 to the Consolidated Financial Statements. ### ADJUSTED EARNINGS PER SHARE (ADJUSTED EPS) Basic Earnings Per Share before exceptional items and IFRS 16 impact. #### Why used Measure of profitability that excludes one-off exceptional items and IFRS 16 adjustments to provide comparability between years. This measure was linked to management incentives in the financial year. #### Reconciliation to IFRS measures Reconciled within note 9 to the Consolidated Financial Statements. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 261 --- GLOSSARY CONTINUED # ADJUSTED PROFIT BEFORE TAX (ADJUSTED PBT) Profit before tax before exceptional items and IFRS 16 impact. # Why used Measure of profitability that excludes one-off exceptional items and IFRS 16 adjustments to provide comparability between years. Reconciliation to IFRS measure | £million | FY26 | FY25 | | --- | --- | --- | | Segment profit (as reconciled in note 2 to the Consolidated Financial Statements) | 154.8 | 149.7 | | Net finance costs excluding exceptional items (note 7) | (36.5) | (35.8) | | IFRS 16 lease interest (note 13) | 25.5 | 22.2 | | Reversal of pre-IFRS 16 onerous lease interest | (0.4) | – | | Adjusted profit before tax | 143.4 | 136.1 | # AVERAGE RETAIL SELLING PRICE (ASP) ASP represents gross revenue generated in the period from sales of the category, divided by the total number of units of such products sold during the period. This metric is a measure of sales performance. # Why used Measure of sales performance. # Reconciliation to IFRS measures Not applicable. # CONSTANT CURRENCY BASIS Results for the period had the exchange rates remained constant from the comparative period. # Why used Measure of revenue growth that excludes the impact of foreign exchange. Reconciliation | Revenue | (£/US$ million) | | --- | --- | | FY26 Group revenue (£) | 1,827.9 | | FY26 US revenue ($) | 1,245.0 | | FY26 US revenue (£) @ FY26 exchange rate | 927.2 | | FY26 US revenue (£) @ FY25 exchange rate | 972.0 | | FY26 Group revenue (£) at constant currency | 1,872.7 | | Adjusted EBIT | (£/US$ million) | | --- | --- | | FY26 Group adjusted EBIT (£) | 154.8 | | FY26 US adjusted EBIT ($) | 128.1 | | FY26 US adjusted EBIT (£) @ FY26 exchange rate | 95.4 | | FY26 US adjusted EBIT (£) @ FY25 exchange rate | 100.0 | | FY26 Group adjusted EBIT (£) at constant currency | 159.4 | | FY26 exchange rate | £1:$1.34 | | --- | --- | | FY25 exchange rate | £1:$1.28 | # EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (EBITDA) EBITDA before exceptional items presented in the Group's Consolidated Income Statement. Shown on a continuing basis before the impact of IFRS 16 and showroom opening and closing costs. These costs include rent (pre-IFRS 16), rates, payroll and other costs associated with the opening or closing of showrooms, or during closures when refurbishments are taking place. # Why used Measure of profitability that excludes one-off exceptional and non-underlying items, IFRS 16 adjustments and showroom opening and closing costs to allow for comparability between years. Reconciliation to IFRS measures | £million | FY26 | FY25 | | --- | --- | --- | | Adjusted EBITDA | 202.2 | 192.3 | | Showroom opening and closing costs | 6.0 | 6.9 | | Share of result of joint venture and associates | – | 0.2 | | EBITDA | 208.2 | 199.4 | # EXCEPTIONAL ITEMS Items that in the judgement of the Directors need to be disclosed by virtue of their size, nature or incidence, in order to draw the attention of the reader and to show the underlying business performance of the Group. # Why used Draws the attention of the reader and shows the items that are significant by virtue of their size, nature or incidence. # Reconciliation to IFRS measures Disclosed in note 4 to the Group's Consolidated Financial Statements. THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 262 --- # FREE CASH FLOW Cash flow shown on a pre-IFRS 16 basis excluding expansionary capex, acquisitions of subsidiaries, exceptional items, financing activities and the purchase of own shares. # Why used Represents the cash generated from operations including maintenance of capital assets. Demonstrates the amount of available cash flow for discretionary activities such as expansionary capex, dividends or acquisitions Reconciliation to IFRS measures | £million | FY26 | FY25 | | --- | --- | --- | | Net decrease in cash and cash equivalents | (33.6) | (15.4) | | Net financing cash flow | 182.1 | 21.1 | | Interest paid | (12.7) | (13.4) | | Lease payments | (83.9) | (80.6) | | Acquisitions | 39.3 | 106.9 | | Investment in joint venture and associates | – | 0.7 | | Exceptional items – cash (note 4) | 5.0 | 8.6 | | Expansionary capex | 65.9 | 72.6 | | Disposal of property, plant and equipment | (0.4) | (2.7) | | Free cash flow | 161.7 | 97.8 | # FREE CASH FLOW CONVERSION Free cash flow divided by Adjusted EBITDA. # Why used Measurement of the Group's ability to convert profit into free cash flow. # Reconciliation to IFRS measures Free cash flow of £161.7 million divided by Adjusted EBITDA of £202.2 million shown as a percentage. # LIQUIDITY HEADROOM Liquidity headroom is unrestricted cash plus undrawn available facilities. # Why used Liquidity headroom shows the amount of unrestricted funds available to the Group. Reconciliation to IFRS measures | £million | FY26 | FY25 | | --- | --- | --- | | Multicurrency revolving credit facility | 275.0 | 275.0 | | Term loan ($125.0 million USD) | 92.1 | 93.9 | | Total facility | 367.1 | 368.9 | | Facility drawn | (122.1) | (195.1) | | Unrestricted cash (note 16) | 45.2 | 79.7 | | Total headroom | 290.2 | 253.5 | # NET CASH/(DEBT) Total borrowings (excluding capitalised transaction costs) less cash and cash equivalents and excluding IFRS 16 lease liabilities. # Why used Measures the Group's indebtedness. # Reconciliation to IFRS measures Reconciled in note 19 to the Consolidated Financial Statements. # NET MARGIN Revenue less inventory recognised as an expense, commissions paid to the providers of interest-free credit and inventory provision movements. # Why used Measures the profit made from the sale of inventory before showroom or overhead costs. Reconciliation to IFRS measures | £million | FY26 | FY25 | | --- | --- | --- | | Revenue | 1,827.9 | 1,651.5 | | Inventory recognised as an expense | (1,182.4) | (1,064.4) | | Other inc. supplier incentives | 5.8 | 11.5 | | Net margin | 651.3 | 598.6 | # RETURN ON CAPITAL EMPLOYED (ROCE) ROCE is defined as Adjusted EBIT divided by average capital employed, calculated on a Last Twelve Months (LTM) basis. Average capital employed is total assets less current liabilities. It is presented pre-IFRS 16 and post-IFRS 16. # Why used ROCE demonstrates the efficiency with which the Group utilises capital. This measure was linked to management incentives in the financial year. # Reconciliation to IFRS measures Adjusted EBIT divided by the average capital employed, which is calculated as follows: | £million | FY26 | FY25 | | --- | --- | --- | | Pre-IFRS 16 total assets | 1,129.5 | 1,123.0 | | Pre-IFRS 16 current liabilities | (260.9) | (275.0) | | Pre-IFRS 16 capital employed | 868.6 | 848.0 | | IFRS 16 adjustments | 291.3 | 313.8 | | Post-IFRS 16 capital employed | 1,159.9 | 1,161.8 | | Pre-IFRS 16 average capital employed | 858.3 | 788.6 | | Post-IFRS 16 average capital employed | 1,160.9 | 1,107.4 | | Pre-IFRS 16 and pre-exceptional Adjusted EBIT | 154.8 | 149.7 | | IFRS 16 adjustments | 24.0 | 19.7 | | Post-IFRS 16 and pre-exceptional Adjusted EBIT | 178.8 | 169.4 | # OTHER DEFINITIONS # EXPANSIONARY CAPITAL EXPENDITURE/CAPEX Expansionary capital expenditure relates to new showrooms or offices, relocations or refurbishments greater than £250,000. # LUXURY WATCHES Watches that have a Recommended Retail Price greater than £1,000. In the period, this definition has been updated to include brands considered to be luxury by virtue of the materials used and craftsmanship. # LUXURY JEWELLERY Jewellery that has a Recommended Retail Price greater than £500. # SHOWROOM MAINTENANCE CAPITAL EXPENDITURE/CAPEX Capital expenditure which is not considered expansionary. STRATEGIC REPORT GOVERNANCE REPORT FINANCIAL STATEMENTS 263 --- GLOSSARY CONTINUED # IFRS 16 ADJUSTMENTS The following tables reconcile from pre-IFRS 16 balances to statutory post-IFRS 16 balances. FY26 Consolidated Income Statement | £million | Pre-IFRS 16 and exceptional items | IFRS 16 adjustments | Exceptional items | Statutory | | --- | --- | --- | --- | --- | | Revenue | 1,827.9 | – | – | 1,827.9 | | Net margin | 651.3 | – | – | 651.3 | | Showroom costs | (313.7) | 71.2 | – | (242.5) | | Overheads | (129.4) | – | (3.2) | (132.6) | | EBITDA | 208.2 | 71.2 | (3.2) | 276.2 | | Showroom opening and closing costs | (6.0) | 4.3 | – | (1.7) | | Share of result of joint venture and associates | – | – | – | – | | Adjusted EBITDA | 202.2 | 75.5 | (3.2) | 274.5 | | Depreciation, amortisation, loss on disposal, impairment of fixed assets and lease modifications | (47.4) | (51.5) | (5.6) | (104.5) | | Adjusted EBIT (segment profit) | 154.8 | 24.0 | (8.8) | 170.0 | | Net finance costs | (11.4) | (25.1) | – | (36.5) | | Adjusted profit before tax | 143.4 | (1.1) | (8.8) | 133.5 | | Adjusted Basic EPS | 45.2p | (0.4)p | (2.2)p | 42.6p | FY26 Balance Sheet | £million | Pre-IFRS 16 | IFRS 16 adjustments | Post-IFRS 16 | | --- | --- | --- | --- | | Goodwill and intangibles | 319.7 | – | 319.7 | | Property, plant and equipment | 218.0 | (1.0) | 217.0 | | IFRS 16 right-of-use assets | – | 338.2 | 338.2 | | Investment in joint venture and associates | 0.5 | – | 0.5 | | Inventories | 458.1 | – | 458.1 | | Trade and other receivables | 62.4 | (9.4) | 53.0 | | Trade and other payables | (296.2) | 45.0 | (251.2) | | IFRS 16 lease liabilities | – | (427.6) | (427.6) | | Net debt | (57.0) | – | (57.0) | | Other | (49.5) | 27.5 | (22.0) | | Net assets | 656.0 | (27.3) | 628.7 | FY25 Consolidated Income Statement | £million | Pre-IFRS 16 and exceptional items | IFRS 16 adjustments | Exceptional items | Statutory | | --- | --- | --- | --- | --- | | Revenue | 1,651.5 | – | – | 1,651.5 | | Net margin | 598.6 | – | (2.0) | 596.6 | | Showroom costs | (292.7) | 65.9 | – | (226.8) | | Overheads | (106.5) | – | (7.0) | (113.5) | | EBITDA | 199.4 | 65.9 | (9.0) | 256.3 | | Showroom opening and closing costs | (6.9) | 4.7 | – | (2.2) | | Share of loss of joint venture and associates | (0.2) | – | – | (0.2) | | Adjusted EBITDA | 192.3 | 70.6 | (9.0) | 253.9 | | Depreciation, amortisation, loss on disposal, impairment of fixed assets and lease modifications | (42.6) | (50.9) | (46.5) | (140.0) | | Adjusted EBIT (segment profit) | 149.7 | 19.7 | (55.5) | 113.9 | | Net finance costs | (13.6) | (22.2) | (2.2) | (38.0) | | Adjusted profit before tax | 136.1 | (2.5) | (57.7) | 75.9 | | Adjusted Basic EPS | 41.6p | (0.8)p | (18.0)p | 22.8p | FY25 Balance Sheet | £million | Pre-IFRS 16 | IFRS 16 adjustments | Post-IFRS 16 | | --- | --- | --- | --- | | Goodwill and intangibles | 304.1 | – | 304.1 | | Property, plant and equipment | 191.9 | 0.5 | 192.4 | | IFRS 16 right-of-use assets | – | 358.6 | 358.6 | | Investment in joint venture and associates | 0.5 | – | 0.5 | | Inventories | 447.4 | – | 447.4 | | Trade and other receivables | 71.1 | (10.6) | 60.5 | | Trade and other payables | (305.5) | 46.0 | (259.5) | | IFRS 16 lease liabilities | – | (454.6) | (454.6) | | Net debt | (96.2) | – | (96.2) | | Other | (47.0) | 33.4 | (13.6) | | Net assets | 566.3 | (26.7) | 539.6 | THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2026 264